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This paper provides a theoretical foundation for the use of rules of thumb for federal transfers when multi-layered public good policies coexist. As a mean to ensure consent of differently rich states we constrain the federal government to attain Pareto superior allocations relative to the decentralized policy scenario. Within a game theoretic general equilibrium framework we show when a uniform federal price instrument in combination with simple transfer criteria (equality, decentralized output level shares, juste retour) deliver Pareto superior allocations. We find that equality (decentralized output level shares) based transfers are effective (in)dependent of the states' capital endowments. We also find an endogenously emerging federal minimum price which ensures consent of all states. At this minimum price the richest state agrees to carry a disproportionately large share of the federal policy cost and becomes the benevolent hegemon.
*** Application to the organized session of Emmanuelle Taugourdeau ***
