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Fiscal Federalism and Capital Accumulation

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  • Brueckner, Jan K

Abstract

This paper explores the effect of fiscal federalism on capital accumulation and growth in an overlapping-generations model. By relaxing the uniform-consumption requirement of a unitary system, fiscal federalism allows the economy to respond to a difference in public-good demands between young and old. Public-good levels and taxes move in opposite directions for the young and old as their different demands are fulfilled, and this leads to opposing changes in private-good consumption for the two groups. These changes disrupt the preferred time path of private consumption, which is restored by a change in saving. This change in turn alters the equilibrium capital intensity of the economy, and growth effects emerge during the transition to the new equilibrium. Copyright 1999 by Blackwell Publishing 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): 1 (1999)
Issue (Month): 2 ()
Pages: 205-24

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Handle: RePEc:bla:jpbect:v:1:y:1999:i:2:p:205-24

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Cited by:
  1. Hammond, George W. & Tosun, Mehmet S., 2009. "The Impact of Local Decentralization on Economic Growth: Evidence from U.S. Counties," IZA Discussion Papers 4574, Institute for the Study of Labor (IZA).
  2. Ramiro Gil-Serrate & Julio López-Laborda, 2004. "Modelling tax decentralisation and regional growth," ERSA conference papers ersa04p194, European Regional Science Association.
  3. Zareh Asatryan & Lars P. Feld, 2013. "Revisiting the Link between Growth and Federalism: A Bayesian Model Averaging Approach," CESifo Working Paper Series 4357, CESifo Group Munich.
  4. Douglas Holtz-Eakin & Mary E. Lovely & Mehmet Serkan Tosun, 2000. "Generational Conflict, Human Capital Accumulation, and Economic Growth," Center for Policy Research Working Papers, Center for Policy Research, Maxwell School, Syracuse University 28, Center for Policy Research, Maxwell School, Syracuse University.
  5. Chu, Angus C. & Yang, C.C., 2012. "Fiscal centralization versus decentralization: Growth and welfare effects of spillovers, Leviathan taxation, and capital mobility," Journal of Urban Economics, Elsevier, vol. 71(2), pages 177-188.
  6. Thushyanthan Baskaran & Lars P. Feld, 2009. "Fiscal Decentralization and Economic Growth in OECD Countries: Is there a Relationship?," CESifo Working Paper Series 2721, CESifo Group Munich.
  7. Brueckner, Jan K., 2006. "Fiscal federalism and economic growth," Journal of Public Economics, Elsevier, Elsevier, vol. 90(10-11), pages 2107-2120, November.
  8. Jan K. Brueckner, 2000. "Fiscal Decentralization in Developing Countries: The Effects of Local Corruption and Tax Evasion," Annals of Economics and Finance, Society for AEF, vol. 1(1), pages 1-18, May.
  9. Wempi Saputra, 2010. "The Choice of Tax Bases under Fiscal Federalism and the Unitary System," Economics Bulletin, AccessEcon, vol. 30(1), pages 219-233.
  10. Jorge Martinez-Vazquez & Baoyun Qiao & Li Zhang, 2007. "The Role of Provincial Policies in Fiscal Equalization Outcomes in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper0705, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  11. Jorge Martinez & Baoyun Qian & Shuilin Wang & Heng-fu Zou, 2006. "Local Public Finance in China: The performance of China's decentralization system," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 553, China Economics and Management Academy, Central University of Finance and Economics.
  12. Jorge Martinez & Baoyun Qian & Shuilin Wang & Heng-fu Zou, 2006. "Local Public Finance in China: Challenges and Policy Options," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 549, China Economics and Management Academy, Central University of Finance and Economics.
  13. Holtz-Eakin, Douglas & Lovely, Mary E. & Tosun, Mehmet S., 2004. "Generational conflict, fiscal policy, and economic growth," Journal of Macroeconomics, Elsevier, Elsevier, vol. 26(1), pages 1-23, March.
  14. Jorge Martinez & Baoyun Qiao & Shuilin Wang & Heng-fu Zou, 2014. "An Essay on Public Finance in China," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 413-519, May.
  15. repec:ebl:ecbull:v:30:y:2010:i:1:p:219-233 is not listed on IDEAS
  16. Ulrich Hange, 2008. "Tax Competition, Elastic Labor Supply, and Growth," CESifo Working Paper Series 2338, CESifo Group Munich.

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