Economics
The Effect of Fiscal Federalism on Interregional Economic Inequality
Quick fact
Cross-country studies suggest that fiscal decentralization is often associated with larger regional income gaps, unless the central government carries out strong interregional transfers to equalize fiscal capacity.
Why this is interesting
Imagine two regions in the same country: one rich, one poor. The country's government changes the way taxes and spending are managed—and the income gap between them changes. What happens?