Ankara : The Department of Economics, İhsan Doğramacı Bilkent University, 2013.Thesis (Master's) -- Bilkent University, 2013.Includes bibliographical references.This study presents a theoretical approach to analyze income and welfare
implications of fiscal decentralization in a static closed economy model where
political factors are taken into account. We provide two alternative Scenarios: in one
scenario government acts like a social planner and solves optimally for the level of
fiscal decentralization; in the other scenario government is politically oriented and
solves for the optimal tax rate. Under both scenarios we obtain non-cooperative
solutions resulting from the interactions of the central government with local
governments. Comparative statics of the model provide explicit solutions which
enable us to derive policy implications. In order to get a better and deeper insight on
the model, we also perform calibration and simulation analyses. We observe that
benevolent government enhances social welfare whereas Leviathan CG enhances
efficiency, measured by effective tax collection.Aslım, Erkmen GirayM.S
