Does letting agents stake a reputational 'trust' asset on the legitimacy of work-verification verdicts raise the quality-adjusted productivity of a fully autonomous agent production economy (requester -> producer -> paid validator, with audits, dispute votes, and adaptive strategies), compared with cheaper institutions at IDENTICAL total verification budget? Mostly no - with a precisely mapped exception, and sharp design rules either way. At matched budget, plain audit routed by accumulate-only validator reputation significantly beats every democratic variant at every tested adversary rate (Holm-corrected Mann-Whitney p<=0.033); when expert audits are cheap, a central noisy auditor dominates everything; and paid validation without accountability is worse than no verification at all. The stylized model's verifiability gradient is real (pooled slope +0.237 per unit of voter signal quality, cell-clustered permutation p=0.0035): truth-staked voting overtakes optimized audit only at jointly high signal quality and adversary rates, and reputation's remaining lead there is erased by identity-reset (whitewashing) attacks - to which truth-staking is intrinsically robust, since a reset identity just donates fresh stake to informative voters. Within democracy the ordering is unambiguous: settle stakes against later ground truth, never against the majority (the deployed coherence-settlement default has an absorbing rubber-stamp equilibrium and loses measurably, p=0.033 at 80 seeds). Staking buys almost no population-level honesty; it works by stake-weighted meritocracy - concentrating trust, hence voting weight, on an informative minority - which also makes it natively sybil-proof where one-agent-one-vote collapses. 'Legitimacy laundering' is second-order at steady state and becomes real only under epistemic finality, which simultaneously starves truth-staking of settlements; the institution's binding resource is eventual ground-truth revelation. A capability-gradient small-LLM instantiation (1B producers, 4B verifiers, hidden-test ground truth, all local) reproduces the model's behavioral premises - including a causal incentive-framing effect on LLM validator strictness (TNR 0.705 paid-per-approval vs 0.864 accountable) - and transfers the institutional structure across two measured operating points, significantly so (Spearman +0.79, permutation p=0.014) at a production-unviable point where the parameter-matched model predicts the observed regime inversion.This manuscript was generated autonomously by the AI Scientist running inside Claude Code (Anthropic); every reported number traces to the project's experiment outputs. It is deposited by the named curator, who takes responsibility for its release.Source & method: https://github.com/qurore/ai-scientist-cli
This article examines how Switzerland’s decentralized welfare structure shapes the outcomes of Basic Income reforms. Using SWISSMOD, a static microsimulation model based on EUROMOD, we simulate unconditional transfer schemes of varying generosity at federal and cantonal levels, combined with alternative financing. Our results show that Basic Income reduces poverty and inequality across all scenarios, but effects differ by implementation level: federal schemes achieve stronger redistribution and uniformity, while cantonal schemes produce heterogeneous outcomes and maintain interregional disparities. Progressive taxation enhances equity but risks excessively high marginal rates; wealth taxation offers fiscal relief but does not automatically enhance poverty reduction or social protection in a decentralized setting. Thus, centralized implementation enhances uniformity and equity across regions, while decentralized administration preserves local differentiation but risks perpetuating spatial inequalities. These findings underscore the importance of aligning social policy design with fiscal federalism when considering unconditional transfers and equitable access to income security.
Official lending is large, senior, and countercyclical, continuing after sovereigns fall into arrears on private debt. We ask why sovereign finance exhibits this division of labor across creditors. In a production economy where a risk-averse sovereign privately allocates imported inputs, commitment is limited on both sides, and monitoring generates a noisy signal, the constrained-optimal allocation is decentralized by defaultable private debt, senior nondefaultable multilateral debt, and concessional bilateral debt whose relief is tied to the signal. Production remains distorted, but the sovereign is never excluded: official lending is monitored liquidity provision. A calibration reproduces procyclical private and countercyclical official debt.
This paper addresses the fundamental challenge of public goods provision-the Samuelsonian Dilemma-by proposing a decentralized mechanism termed Citizen's Executive Right (CER). Unlike traditional central-planning models, the CER mechanism endows agents with dispositional authority over tax revenues via Personal Public Accounts (PPAs). We introduce Temporal Scarcity-enforced by a "Rule of Lapsing"-as an information-forcing operator that collapses strategic delay into discrete preference signals. Our theoretical contributions are threefold: 1. Incentive Compatibility: We prove that under loss aversion, the mechanism achieves a symmetric Perfect Bayesian Equilibrium that is "detail-free" (Wilson Doctrine). 2. The Extended Walras's Law: We derive an identity showing that the clearing of the public sphere, measured by the Total Lapsing Rate ($\Lambda_t$), is a sufficient condition for general equilibrium. 3. Dynamic Stability: Using the Routh-Hurwitz criteria, we demonstrate that the balanced equilibrium is locally asymptotically stable, where the temporal pressure acts as a feedback operator. Our results suggest that institutionalizing time-limited dispositional rights can resolve the structural void in public finance, providing a robust blueprint for market-based public governance.
In a typical decentralized autonomous organization (DAO), people organize themselves into a group that is programmatically managed. DAOs can act as bidders in auctions, with a DAO's bid treated by the auctioneer as if it had been submitted by an individual, without regard to the internal structure of the DAO. We study auctions in which the bidders are DAOs. More precisely, we consider the design of two-level auctions in which the "participants" are groups of bidders rather than individuals. Bidders form DAOs to pool resources, but must then also negotiate the terms by which the DAO's winnings are shared. We model the outcome of a DAO's negotiations by an aggregation function (which aggregates DAO members' bids into a single group bid), and a budget-balanced cost-sharing mechanism (that determines DAO members' access to the DAO's allocation and distributes the total payment demanded from the DAO to its members). We pursue two-level mechanisms that are incentive-compatible (with truthful bidding a dominant strategy for members of each DAO) and approximately welfare-optimal. We prove that, even in the case of a single-item auction, incentive-compatible welfare maximization is not possible: No matter what the outer mechanism and the cost-sharing mechanisms used by DAOs, the welfare of the resulting two-level mechanism can be a $\approx \ln n$ factor less than optimal. We complement this lower bound with a natural two-level mechanism that achieves a matching approximate welfare guarantee. Our upper bound also extends to multi-item auctions where individuals have additive valuations. Finally, we show that our positive results cannot be extended much further: Even in multi-item settings with unit-demand bidders, truthful two-level mechanisms form a highly restricted class and as a consequence cannot guarantee any non-trivial approximation of the maximum social welfare.
Abstract Setting limits on government action is critical to economic development. Some forms of government organization, such as market‐preserving federalism, seem effective to protect property rights in the long term with good results for economic efficiency. Spain endowed its regions with “Statutes of Autonomy” in the 1980s thus moving from a centralized to a decentralized form of government. It renewed and expanded some of the statutes in the 2000s. This article investigates whether these two waves of regionalization, which had their own characteristics in each region, had led to positive effects on economic performance. Using a novel autonomous region/country‐matched balanced sample for the period 1950–2016, we apply the synthetic control method and compare the economic growth trajectories of Spanish regions with their synthetic control groups not affected by the regionalization process. We show that the first wave of “Statutes of Autonomy” had a positive but temporary economic growth impact. By contrast, the second wave of regionalization of the 2000s is associated with a negative growth impact.
One of the benefits of decentralized finance (DeFi) – an alternative financial system built on blockchain – is composability, which means the system's building blocks (tokens) can freely interact with one another to form new services. One example is stablecoin, a token with fixed exchange rate, which is backed by token collaterals. While stablecoins can be used to facilitate payments and exchanges, in DeFi they can be used to earn returns (“yield farming†), potentially multiplicatively. We use transaction-level blockchain data to analyze a stablecoin's flows between protocols and provide suggestive evidence of DeFi yield-chasing behavior. We shed light on what DeFi total value locked might really measure and highlight the complexity in DeFi analysis and market surveillance.
Recently, the issue of federalism has turned at the centre of the political debate in Italy. It is basically due to the growing demand of rich northern regions who in 2018 laid down the requests to exercise additional functions retaining a more significant part of revenues that the central government collects in their territories. Another reason for attention to this issue is that the long period of public finance consolidation in Italy (2011-15) put the implementation of fiscal federalism to a standstill. There is a growing demand to ascertain the measure to which this implementation has been biased o remained undone. This paper focuses on this second issue investigating to which extent the design of fiscal federalism reform has been applied to the Italian municipalities with a special focus on the equalization system. The paper first proposes a review on the evolution of public finance setting in Italy before the crisis (2008-09), considering the decentralization process in the 1990s and the Constitutional reform of 2001 followed by the enabling law 42 in 2009. Then it looks at the period of fiscal consolidation after the financial crisis in 2011 focusing on the burden of adjustment measures imposed to Italian municipalities. Finally, it tries to summarize the contradictions that the overlapping of two contrasting political agendas – the centralization of public finance under fiscal consolidation and the ongoing fiscal federalism reform – created for the equalization system of municipalities.
Cinzia Di Novi, Massimiliano Piacenza, Silvana Robone, Gilberto Turati
Recent theories on fiscal decentralization support the view that sub-national governments who finance a larger share of their spending with taxes raised locally by themselves are more accountable towards their citizens. Whilst evidence on improvements in spending efficiency is relatively common, little is known about the effects on inequalities amongst the population. In this paper we exploit a reform aimed at increasing regional tax autonomy in Italy to provide quasi-experimental evidence on the impact of fiscal decentralization on health disparities between- and within-regions. Our findings, robust to a number of robustness checks, support the view that fiscal decentralization does not impact on between-regional inequalities but can help to reduce inequalities within regions. However, this last effect depends on the degree of economic development: richer regions are better than poorer ones in containing inequalities.
Raúl García-Gómez, Jorge Onrubia, Antonio Jesús Sánchez Fuentes
Efficient use of public resources is clearly a relevant issue to be studied from several points of view. Among others, it accounts for a significant share of the total economy activity and it deals with non market oriented activities. In Spain, the regional level is particularly relevant due to the progressive decentralization during the 200s of key public policies constituting the welfare state (as education, health, etc.). Consequently,it increased notably their financing needs but affecting asymmetrically because of the important differences in their fiscal capacity. Moreover, they mostly share (15 of 17) a common financing system in which an efficient use of resources is assumed but not evaluated. Our results show that normally a few of the regions tend to be the top performers, but there no regions performing poorly in every aspect. It is also worth noting that no dramatic changes can be seen in terms both of expenditure and performance during the recent Great Recession.
Paolo Chiades, Luciano Greco, Vanni Mengotto, Luigi Moretti · 5 authors
For the period 2003–2014, we investigate unexplored effects of fiscal consolidation in decentralized public finance on a large dataset of Italian municipalities. Based on a simple, realistic theoretical model, we show that municipalities increase arrears on committed investment expenditure as a response to intergovernmental transfer cuts. Then, we test our predictions controlling for potential sources of endogeneity, and find that a reduction in intergovernmental transfers causes a significant increase in arrears, in addition to other common adjustments to local fiscal policies (e.g., tax revenues). Our results highlight a perverse effect of fiscal consolidation packages implemented by centrally imposed fiscal restraints.
Concha Artola, María Gil Izquierdo, Javier J. Pérez, Alberto Urtasun · 6 authors
In highly decentralized countries the subnational dimension of economic developments acquires particular relevance, given the existence of potential spillover effects across jurisdictions or the existence of asymmetric impacts of national-wide macroeconomic shocks. At the same time, though, the analysis of sub-national macroeconomic and public finance short-term developments tend to be restricted in many countries due to data limitations. Against this backdrop, the aim of this paper is to provide an overview of the available data for monitoring macroeconomic and public finance developments at the regional level in Spain, and to present some examples of its practical use in real time. After a thoroughly review of the publicly available information, we identify two key informational gaps in this area of conjunctural analysis, namely: (i) the lack of homogeneous and official quarterly measures of aggregate regional economic activity (in particular, real GDP), and (ii) the limited sample size of time series pertaining to government budgetary developments at the regional level.
This paper examines the effects of fiscal decentralization on the education sector for a sample of 62 countries. The results suggest that different sources of fiscal decentralization have distinct effects on education expenditure and quality. While subnational governments that are financed through own-tax revenues are more likely to increase the funds allocated to education, they also seem less concerned with maintaining teaching quality. This study provides evidence that decentralized structures cater better to local social needs. Fiscal decentralization is, therefore, an important policy instrument for achieving social goals.
Maria Ambrosanio, Paolo Balduzzi, Massimo Bordignon
For almost two decades, starting from the early ‘90s, Italy experienced the strongest wave of decentralization reforms in its post II World War history. The causes were both economic and political. Yet, in recent years, again economic and political causes seem to call for opposite reforms. Along with a second wave of scandals, this time interesting local politicians, the crisis that has hit our country since 2008 is having relevant effects on the relationships between central and local governments. The aim of this paper is to assess dimension and direction of these effects. We first review the situation of "fiscal federalism" in Italy before the crisis, summarizing the decentralization process in the ‘90s, its consequences in terms of financing and functions for local governments, the constitutional reform of 2001 and the implementation problems this created. We then look at the numbers of the crisis; the "double dip" of the economic cycle in the period 2007- 2013, the policies implemented to contrast the financial market confidence crisis and the distribution of the burden of the fiscal consolidation across levels of government. We also discuss the institutional features of the implemented policies, in particular referring to number of local governments and to the financial relationships between level of governments, including taxes, transfers, fiscal rules and bankruptcy procedurals. Finally, we look at the future: what consequences will the new European rules, as enshrined in the new art. 81, have on the financial relationships between levels of government? And how is the balance of power between the center and the periphery going to change in lieu of the new proposed Constitutional reform?
Cinzia Di Novi, Massimiliano Piacenza, Silvana Robone, Gilberto Turati
This paper aims at investigating empirically the impact of fiscal decentralization reforms on inequality in well-being. In particular, we look at the effects on health inequalities following the assignment of larger tax power to the Italian Regions for financing their health expenditure, starting from the end of the Nineties. Exploiting large differences in the size of the tax base across Regions, we find that fiscal decentralization processes that attribute a greater tax power to lower government tiers, besides reducing inefficiencies of healthcare policies, seem to be effective in reducing also within-regional disparities in health outcomes. However, the degree of economic development � on which depends the actual fiscal autonomy from Central government � significantly affects the effectiveness of these reforms and highlights the importance to take properly into account the specific features of the context where the decentralization of power is implemented.
This paper models the local tax mix determination process in the presence of statewide fiscal limitations—the decentralized government finance archetype—and shows how excess sensitivity of local public spending to grants (the conventionally and somewhat misleadingly termed “flypaper effect”) arises in the constrained tax mix irrespective of whether lower or upper limits bind and how it cannot, in general, be taken as a symptom of local government overspending. An empirical application to Italian province panel data provides consistent evidence of the role of corner solutions produced by two-sided tax limits in explaining the sensitivity of local public expenditures to grants.