∗We are grateful to IEB for its financial support. We would like to thank May Elsayyad, Leonzio Rizzo, and Tanguy van Ypersele, as well as participants at the 2011 Journée Louis André Gérard Varet, the IEB IV Workshop on Fiscal Federalism, the GREQAM seminar, the 2013 Southern Economic Association Meetings, and a seminar at Florida International University, for useful comments on an earlier ver...

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