This chapter examines, both theoretically and empirically, the causal connections from multiple local and provincial governments and their local assignment of revenues and services to the three goals of economic efficiency, political participation, and the protection of rights and liberties. Economic Federalism does not require the direct representation of provincial or local governments within the central government. Rather, the central government is managed by a single leader, a president, elected nationally. The president makes and implements all national policies. The chapter then reviews the theory and evidence as to the performance of competitive lower-tier governments and finds that allowing citizens variety and choice provides significant economic benefits in efficiency and growth. Matters are less clear for how Economic Federalism might perform against the goals of democratic participation and the protection of rights and liberties.
Keywords: local governments, provincial governments, economic efficiency, political participation, protection of rights, protection of liberties, Economic Federalism, central government, president, lower-tier governments
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