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Redistributing income under fiscal vertical imbalance

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  • Bouton, Laurent
  • Gassner, Marjorie
  • Verardi, Vincenzo

Abstract

From the literature on decentralization, it appears that the fiscal vertical imbalance (i.e. the dependence of sub-national governments on national government revenues to support their expenditures) is somehow inherent to multi-level governments. Using a stylized model we show that this leads to a reduction of the extent of redistributive fiscal policies if the maximal size of government has been reached. To test for this empirically, we use some high quality data from the LIS dataset on individual incomes. The results are highly significant and point in the direction of our theoretical predictions.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 24 (2008)
Issue (Month): 2 (June)
Pages: 317-328

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Handle: RePEc:eee:poleco:v:24:y:2008:i:2:p:317-328

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Web page: http://www.elsevier.com/locate/inca/505544

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Cited by:
  1. Neyapti, Bilin, 2010. "Fiscal decentralization and deficits: International evidence," European Journal of Political Economy, Elsevier, vol. 26(2), pages 155-166, June.
  2. Bruno De Borger & Vincenzo Verardi, 2009. "Estimating the direct costs of social conflicts: Road blockings in Bolivia," Journal of International Development, John Wiley & Sons, Ltd., vol. 21(7), pages 932-946.
  3. Bilin Neyapti & Zafer Akin & Zeynep B. Cevik, 2011. "Does Fiscal Decentralization Promote Fiscal Discipline?," Departmental Working Papers 1101, Bilkent University, Department of Economics.
  4. Neyapti, Bilin, 2013. "Fiscal decentralization, fiscal rules and fiscal discipline," Economics Letters, Elsevier, vol. 121(3), pages 528-532.

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