Overlapping soft budget constraints
AbstractOur paper identifies a potential problem with decentralization at a time when its virtues are widely extolled. We show that responsibility for equalization at multi-levels within a decentralized federation creates an overlapping equalization policy that can worsen fiscal discipline. Contrary to Qian and Roland (1998), we also show in our set-up that fiscal competition among regional rescuers does not act as a commitment device to harden the local budget constraint.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Urban Economics.
Volume (Year): 67 (2010)
Issue (Month): 3 (May)
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Web page: http://www.elsevier.com/locate/inca/622905
Soft budget constraint Fiscal federalism Capital tax competition;
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