III/IV should really be IIIa/IIIb - they're two variations of governing system out in the sticks.
Here's how I see it:
Type1 - Homeland Government: This is where you're people come from and best in any place you can build it.
Type2 - Conquered Areas: This is part of your empire but doesn't originally have the same type of culture or battle tactics as you. I usually build these in every place I can.
Type3 - Outlying Regions: These are areas that are part of your empire but are far from your center and have much of the original culture intact. Alternately, these can be areas near you that you choose to leave culturally intact. Even though type3 can be worse than type4 for many factions, I usually build these in most outlying areas for roleplay purposes.
Type4 - Allied Nation: These are a different form of protectorate or a form of puppet government. They are their own nation and have their own culture but they will follow your lead in anything you tell them to do. I'll usually build these in places that have good regional units (Galatia, Thrace, Crete, etc) or in areas that I feel would have been allied rather than subjugated for roleplay purposes.
That's my oppinion and how I treat governments. They vary from faction to faction but that is basically it.
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