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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. Bilin Neyapti & Zafer Akin & Zeynep B. Cevik, 2011. "Does Fiscal Decentralization Promote Fiscal Discipline?," Departmental Working Papers, Bilkent University, Department of Economics 1101, Bilkent University, Department of Economics.
  2. DE BORGER, Bruno & VERARDI, Vincenzo, 2008. "Estimating the direct costs of social conflicts: Road blockings in Bolivia," Working Papers 2008013, University of Antwerp, Faculty of Applied Economics.
  3. Neyapti, Bilin, 2013. "Fiscal decentralization, fiscal rules and fiscal discipline," Economics Letters, Elsevier, Elsevier, vol. 121(3), pages 528-532.
  4. Bilin Neyapti, 2003. "Fiscal Decentralisation and Deficits: International Evidence," Working Papers, Turkish Economic Association 2003/2, Turkish Economic Association.

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