In democratic societies, competitive federalism exists when elected officials at lower tiers of government have independent authority to determine a broad range of tax, expenditure, and regulatory policies (Feld et al. 2004). Within such a system, the higher and lower tiers each have a specific domestic policy function to perform (Peterson 1995). The central government executes the redistributive function, the reallocation of resources from the productive to the dependent segments of society.1 The lower tiers of government carry out the developmental function by establishing a regulatory framework and providing services that foster community prosperity and growth. Their focus on development is a byproduct of constraints imposed by their structural position within a competitive federal system. States, provinces, municipalities, and special districts compete with one another for human, material, and financial capital. To enjoy prosperity, states and municipalities need to offer services and establish regulatory frameworks that attract productive residents and business without imposing overly burdensome taxes (Peterson 1981, 1995; Tiebout 1956). Winners typically enjoy higher property values, increased economic activity, population growth, and enhanced fiscal strength. Losers struggle with property devaluation, capital flight, out-migration, and fiscal stress. If losses are extreme, the state or municipality risks bankruptcy.
ፍትህ ለሁሉም / Justice for All