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Interregional Disparities in Productivity and the Choice of Fiscal Regime

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  • KIMIKO TERAI
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    Abstract

    Two districts with divergent productivity levels engage in policy-making on the provision of local public goods that enhance future income and hence create a dynamic linkage across periods. The policy choices of district representatives are derived under alternative fiscal systems, and the relative merits of the systems are evaluated. It is predicted that a decentralized system is more likely to be selected in a more equal society. On the other hand, when a great deal of benefit spills over from a local public good, or when policy makers are expected to care solely about the immediate effects of their decisions on their districts, a centralized system is more likely to be selected. Copyright � 2009 Wiley Periodicals, Inc..

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    Bibliographic Info

    Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

    Volume (Year): 11 (2009)
    Issue (Month): 3 (06)
    Pages: 383-409

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    Handle: RePEc:bla:jpbect:v:11:y:2009:i:3:p:383-409

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