The choice of local tax rates and local public good levels in an interregional economic system cannot be efficient when there is mobility of persons or goods. In fact each region chooses tax rates and/or local public goods taking into account only the level of its welfare and not the level of the welfare of all regions of the federation. We examine how the literature deals with this issue, looking at some interesting particular cases: tax competition on consumption goods (Mintz and Tulkens (1986); Kanbur and Keen (1993); Hamilton and Slutsky (1994); Bordignon (1995); Scharf (1999)), on factors of production (Zodrow and Mietzkowsky (1986) Wildasin (1988); Bucotvesky (1991); Wilson (1986), (1991)). We discuss the policy implications of these theoretical analyses, pointing out the empirical relevance of the fiscal relationship among regions or states in a federation (Besley, Case (1995); Besley, Griffith, Klemm (2001); Devereux, Lockwood e Redoano (2002)). We finally discuss some recent literature on the role of vertical externalities (Keen e Kotsogiannis (2002); Rizzo (2003)) and interregional transfers (Wildasin (1991); Dalbhy (1996); Bucovetsky e Smart (2002); Esteller-Moré e Solé-Ollé (2002); Kothenburgen (2002) ; Rizzo (2002)).