First generation fiscal federalism (FGFF) studies the performance of decentralized systems under the assumption of benevolent social planners. Second generation fiscal federalism (SGFF) studies performance based on the fiscal and political incentives facing subnational officials. The paper focuses on three aspects of SGFF. First, it considers the design of intergovernmental transfers. While FGFF emphasizes correcting vertical and horizontal equity, SGFF emphasizes the importance of fiscal incentives for producing local economic prosperity. SGFF extends FGFF approaches by showing how non-linear transfer systems can produce both equalization and high marginal fiscal incentives to produce local economic growth. Second, the paper raises the fiscal incentive approach, showing how different tax systems produce different fiscal incentives for political officials to choose policies. Third, the paper discusses the interaction of democracy and fiscal federalism.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)