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The recent scholarship has made distinction between two generation of literature in fiscal federalism. The study has critically analysed the first generation theory and second generation theory of fiscal federalism. Though the later approaches the problem of fiscal federalism from different perspective, it does not challeng but complements the former. The paper argues that second generation theory is an ongoing effort to bulid a theory in response to fiscal challeneges facing a number ofdoi:10.1007/s40847-015-0009-0 fatcat:sda3usjmwjan5jdaxoizz52l3e