Role of the government can be played on either centralised or decentralised basis. In recent years, due to developments in the European Union, suspicion of powerful centralised system of government, growing disenchantment with the functioning of the public sector, and cultural and ethnic diversity, decentralisation has become an attractive topic among both economists and political scientists. Therefore, this publication touches on theoretical work on provision of public goods, Tiebout model, club theory, and the Leviathan model as well as empirical aspects of decentralised governance.