Citation URL: http://www.urban.org/RichardMBird

An important characteristic of many countries is that they exhibit, to greater or lesser degrees, some "asymmetry" in the way in which different regions are treated by their intergovernmental fiscal systems. This paper explores some of the varied extents and manners in which such asymmetrical treatment may help or hinder the maintenance of an effective nation-state, where "effectiveness" encompasses both how effectively, efficiently, and (perhaps) equitably public services are provided throughout the national territory and also the effects asymmetry may have on the very existence of "fragmented" nation-states.

Fiscal federalism is the analysis of the problems that give rise to, and arise from, the existence of more than one level of government within the same geographical area. As originally developed by Musgrave (1959) and Oates (1972), the "theory of fiscal federalism" concerns the division of public-sector functions and finances in a logical way among multiple layers of government (King 1984). This article describes the theories of fiscal federalism and the history of the literature.

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