ABSTRACT
According to the ‘American-Neoclassical’ approach, stemming from the Tiebout (1956) model, the main advantage of federalism lies in the fact that individuals with similar tastes, including those related to risk-aversion and the provision of public goods, can cluster in the same jurisdictions. According to this view, federalism can favour the maximum differentiation of the characteristics of the individuals clustering in the different States. The starting point of this chapter is a criticism of this approach. While the main advantage of federalism is related to the possibility of clustering heterogeneous individuals, the assumption of costless movement from one State to the other implicitly implies that individuals are homogeneous in some of other important characteristics. For instance, the hypothesis that individuals face low mobility costs involves that they have very minor cultural and linguistic differences. This is not the case of Europe where cultural-linguistic differentiation is high and federalism is often associated to the protection of the cultural specificity of certain regions.
