Division of Functional Responsibilities:

Allocation Function:

In a multi-unit system of government which level of government should provide which type of pure public  goods and services in order to ensure efficiency in the provision of these goods. A largely agreed upon principle of distribution of these types of goods is the benefit incidence. For example, some public goods are such that their benefit incidence is nationwide (eg. defence, space exploration, navigation) while the benefit incidence of some others is spatially limited to regional and local areas (eg. law and order, streetlight etc). In other words, public goods and services need to be provided and their costs are to be shared in accordance with the preferences of the benefit region concerned. In a democratic structure, the chosen services should be voted and paid for by the resident voters of the region. Thus, those services whose benefit incidence is nationwide like the defence need to be provided by the federal government. Services which have regional and local benefit incidence like law and order and streetlight need to be provided by the sub-central governments at regional and local level respectively. Of course, the spatial  characteristics of public goods and services warrants their provision by multiple jurisdictions of governments of different sizes at the regional and local level.