Devolution in (Non-)Democracies

The paper develops a very simple model explaining the process of devolution of an individual region in a politically asymmetric country, where a region and the central government bargain over the distribution of tax revenue given a particular tax rate, focusing on the impact of political regime on the decentralization outcome. It finds that under most political settings large regions, regions with low secession costs and regions significantly different from the rest of the country are able to receive a ceteris paribus higher share of the tax revenue divided between the federal and the regional levels of government. In a democratic federation with an autocratic region the share of the federation in the tax revenue goes up as opposed to the case when both governments are non-democratic. In a non-democratic federation with democratic region both higher and lower centralization is possible. Finally, in case of pure democracy, the results are ambiguous as opposed to the non-democratic case. and seem to be driven by the relative severeness of electoral constraint for the federal and the regional government. Though in a pure non-democratic or pure democratic case secession is impossible, in semi-democracies secession can occure.