IDEAS home Printed from https://ideas.repec.org/a/eee/pubeco/v62y1996i3p363-397.html
   My bibliography  Save this article

A computable general equilibrium model of intergovernmental aid

Author

Listed:
  • Nechyba, Thomas

Abstract

This paper introduces a computable general equilibrium model of intergovernmental relations in which heterogeneous agents (i) are endowed with income and houses, (ii) are fully mobile between multiple jurisdictions, and (iii) vote in both local and state elections to determine local property and state income tax rates. The model is calibrated to New Jersey micro tax data and used to study the general equilibrium effects of state government policies. Three different types of intergovernmental programs are analyzed: (i) redistributive revenue sharing, (ii) district power equalization and (iii) deductibility of local taxes. The approach facilitates a heretofore difficult comparative analysis in that it provides for an integrated investigation of these programs in a single general equilibrium model.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Nechyba, Thomas, 1996. "A computable general equilibrium model of intergovernmental aid," Journal of Public Economics, Elsevier, vol. 62(3), pages 363-397, November.
    • Handle: RePEc:eee:pubeco:v:62:y:1996:i:3:p:363-397
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/0047-2727(95)01565-5
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Douglas Holtz-Eakin & Harvey S . Rosen, 1988. "Tax Deductibility and Municipal Budget Structure," NBER Chapters, in: Fiscal Federalism: Quantitative Studies, pages 107-136, National Bureau of Economic Research, Inc.
    2. Feldstein, Martin S & Metcalf, Gilbert E, 1987. "The Effect of Federal Tax Deductibility on State and Local Taxes and Spending," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 710-736, August.
    3. Fischel, William A., 1976. "An evaluation of proposals for metropolitan sharing of commercial and industrial property tax base," Journal of Urban Economics, Elsevier, vol. 3(3), pages 253-263, July.
    4. Singh, Nirvikar & Thomas, Ravi, 1989. "Matching Grant Versus Block Grants With Imperfect Information," National Tax Journal, National Tax Association;National Tax Journal, vol. 42(2), pages 191-203, June.
    5. Wildasin, David E., 1983. "The welfare effects of intergovernmental grants in an economy with independent jurisdictions," Journal of Urban Economics, Elsevier, vol. 13(2), pages 147-164, March.
    6. Holtz-Eakin, Douglas & Rosen, Harvey, 1990. "Federal deductibility and local property tax rates," Journal of Urban Economics, Elsevier, vol. 27(3), pages 269-284, May.
    7. de Bartolome, Charles A. M., 1991. "Redistributive state aid to local communities," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 511-528, November.
    8. Luger, Michael I., 1988. "Federal tax reform and the interjurisdictional mobility impulse," Journal of Urban Economics, Elsevier, vol. 23(2), pages 235-250, March.
    9. Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-858, August.
    10. Ladd, Helen F. & Yinger, John, 1994. "The Case for Equalizing Aid," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(1), pages 211-224, March.
    11. Bucovetsky, Sam, 1982. "Inequality in the Local Public Sector," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 128-145, February.
    12. Inman, Robert P. & Wolf, Douglas, 1976. "Sofa: A simulation program for predicting and evaluating the policy effects of grants-in-aid," Socio-Economic Planning Sciences, Elsevier, vol. 10(2), pages 77-88.
    13. Thomas J. Nechyba, 1996. "Public School Finance in a General Equilibrium Tiebout World: Equalization Programs, Peer Effects and Private School Vouchers," NBER Working Papers 5642, National Bureau of Economic Research, Inc.
    14. Oakland, William H., 1994. "Fiscal Equalization: An Empty Box?," National Tax Journal, National Tax Association, vol. 47(1), pages 199-209, March.
    15. Brueckner, Jan K., 1983. "Central-city income redistribution and the flight to the suburbs : A stylized model," Regional Science and Urban Economics, Elsevier, vol. 13(2), pages 177-193, May.
    16. George R. Zodrow & Peter Mieszkowski, 2019. "Pigou, Tiebout, Property Taxation, and the Underprovision of Local Public Goods," World Scientific Book Chapters, in: George R Zodrow (ed.), TAXATION IN THEORY AND PRACTICE Selected Essays of George R. Zodrow, chapter 17, pages 525-542, World Scientific Publishing Co. Pte. Ltd..
    17. Reschovsky, Andrew, 1994. "Fiscal Equalization and School Finance," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(1), pages 185-197, March.
    18. Howard Chemick & Andrew Reschovsky, 1986. "Federal tax reform and the financing of state and local governments," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 5(4), pages 683-706.
    19. Inman, Robert P., 1977. "Micro-fiscal planning in the regional economy : A general equilibrium approach," Journal of Public Economics, Elsevier, vol. 7(2), pages 237-260, April.
    20. Zodrow, George, 1984. "The incidence of metropolitan property tax base sharing and rate equalization," Journal of Urban Economics, Elsevier, vol. 15(2), pages 210-229, March.
    21. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1993. "Existence of voting and housing equilibrium in a system of communities with property taxes," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 585-610, November.
    22. Ladd, Helen F. & Yinger, John, 1994. "The Case for Equalizing Aid," National Tax Journal, National Tax Association, vol. 47(1), pages 211-24, March.
    23. Reschovsky, Andrew, 1994. "Fiscal Equalization and School Finance," National Tax Journal, National Tax Association, vol. 47(1), pages 185-97, March.
    24. Rothstein, Paul, 1992. "The demand for education with 'power equalizing' aid : Estimation and simulation," Journal of Public Economics, Elsevier, vol. 49(2), pages 135-162, November.
    25. Feldstein, Martin S, 1975. "Wealth Neutrality and Local Choice in Public Education," American Economic Review, American Economic Association, vol. 65(1), pages 75-89, March.
    26. Inman, Robert P., 1989. "The local decision to tax : Evidence from large U.S. Cities," Regional Science and Urban Economics, Elsevier, vol. 19(3), pages 455-491, August.
    27. Westhoff, Frank, 1977. "Existence of equilibria in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 14(1), pages 84-112, February.
    28. Singh, Nirvikar & Thomas, Ravi, 1989. "Matching Grant Versus Block Grants with Imperfect Information," National Tax Journal, National Tax Association, vol. 42(2), pages 191-203, June.
    29. Cassidy, Glenn & Epple, Dennis & Romer, Thomas, 1989. "Redistribution by local governments in a monocentric urban area," Regional Science and Urban Economics, Elsevier, vol. 19(3), pages 421-454, August.
    30. Bradford, David F & Oates, Wallace E, 1971. "Towards a Predictive Theory of Intergovernmental Grants," American Economic Review, American Economic Association, vol. 61(2), pages 440-448, May.
    31. Oakland, William H., 1994. "Fiscal Equalization: An Empty Box?," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(1), pages 199-209, March.
    32. Romer, Thomas & Rosenthal, Howard & Munley, Vincent G., 1992. "Economic incentives and political institutions: Spending and voting in school budget referenda," Journal of Public Economics, Elsevier, vol. 49(1), pages 1-33, October.
    33. Robert P. Inman, 1989. "The Local Decision to Tax: Evidence from Large U.S. Cities," NBER Working Papers 2921, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas J. Nechyba, 2003. "Centralization, Fiscal Federalism, and Private School Attendance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 179-204, February.
    2. Caroline M. Hoxby, 2001. "All School Finance Equalizations are Not Created Equal," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1189-1231.
    3. Thomas J. Nechyba, 2000. "Mobility, Targeting, and Private-School Vouchers," American Economic Review, American Economic Association, vol. 90(1), pages 130-146, March.
    4. Raquel Fernandez & Richard Rogerson, 2003. "Equity and Resources: An Analysis of Education Finance Systems," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 858-897, August.
    5. Thomas Nechyba, 1996. "Fiscal federalism and local public finance: A computable general equilibrium (CGE) framework," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(2), pages 215-231, May.
    6. Deltas, George & Van Der Beek, Gregor, 2003. "Modeling fiscal federalism: a decomposition analysis of changes in intra-European Union budgetary transfers," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(4), pages 592-613.
    7. Raquel Fernandez, 2001. "Sorting, Education and Inequality," NBER Working Papers 8101, National Bureau of Economic Research, Inc.
    8. Nechyba, Thomas J. & Strauss, Robert P., 1998. "Community choice and local public services: A discrete choice approach," Regional Science and Urban Economics, Elsevier, vol. 28(1), pages 51-73, January.
    9. Debra Hevenstone & Ben Jann, 2016. "Fiscal Federalism and Tax Equalization: The potential for progressive local taxes," University of Bern Social Sciences Working Papers 19, University of Bern, Department of Social Sciences.
    10. Thomas J. Nechyba, 1996. "Public School Finance in a General Equilibrium Tiebout World: Equalization Programs, Peer Effects and Private School Vouchers," NBER Working Papers 5642, National Bureau of Economic Research, Inc.
    11. Thomas J. Nechyba, 2006. "Alternative education finance strategies," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Mar, pages 7-27.
    12. de Bartolome, Charles A. M. & Ross, Stephen L., 2003. "Equilibria with local governments and commuting: income sorting vs income mixing," Journal of Urban Economics, Elsevier, vol. 54(1), pages 1-20, July.
    13. Berrittella, Maria, 2017. "Can stability of foreign aid agreement reduce global income inequality?," Economic Analysis and Policy, Elsevier, vol. 54(C), pages 105-111.
    14. Thomas J. Nechyba, 1999. "A Model of Multiple Districts and Private Schools: The Role of Mobility, Targeting, and Private School Vouchers," NBER Working Papers 7239, National Bureau of Economic Research, Inc.
    15. Fernández, Raquel, 2001. "Sorting, Education and Inequality," CEPR Discussion Papers 3020, C.E.P.R. Discussion Papers.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Albouy, David, 2012. "Evaluating the efficiency and equity of federal fiscal equalization," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 824-839.
    2. Campbell, Colin D. & Fischel, William A., 1996. "Preferences for School Finance Systems: Voters Versus Judges," National Tax Journal, National Tax Association, vol. 49(1), pages 1-15, March.
    3. Campbell, Colin D. & Fischel, William A., 1996. "Preferences for School Finance Systems: Voters Versus Judges," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(1), pages 1-15, March.
    4. Aaronson, Daniel, 1999. "The Effect of School Finance Reform on Population Heterogeneity," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(1), pages 5-29, March.
    5. Thomas Nechyba, 1996. "Fiscal federalism and local public finance: A computable general equilibrium (CGE) framework," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(2), pages 215-231, May.
    6. Anderson, Nathan B., 2011. "No relief: Tax prices and property tax burdens," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 537-549.
    7. Calabrese, Stephen & Epple, Dennis & Romano, Richard, 2023. "Majority choice of taxation and redistribution in a federation," Journal of Public Economics, Elsevier, vol. 217(C).
    8. Sigrid Roehrs & David Stadelmann, 2010. "Mobility and local income redistribution," Working Papers 2010/4, Institut d'Economia de Barcelona (IEB).
    9. Haughwout, Andrew F. & Inman, Robert P., 2001. "Fiscal policies in open cities with firms and households," Regional Science and Urban Economics, Elsevier, vol. 31(2-3), pages 147-180, April.
    10. Alexander Cappelen & Bertil Tungodden, 2007. "Local autonomy and interregional equality," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 28(3), pages 443-460, April.
    11. Sigrid Röhrs & David Stadelmann, 2014. "Homeownership, Mobility, And Local Income Redistribution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(4), pages 569-605, August.
    12. Vermeulen, W. & Allers, Maarten, 2014. "Fiscal equalization, capitalization and the flypaper effect," Research Report 14023-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    13. Calabrese, Stephen & Epple, Dennis & Romano, Richard, 2015. "Majority choice of tax systems in single- and multi-jurisdictional economies," Journal of Public Economics, Elsevier, vol. 131(C), pages 58-70.
    14. Jyotsna Rosario & K. R. Shanmugam, 2023. "Impact of transfers on elementary education expenditure and measuring equalisation transfers to Indian States," Indian Economic Review, Springer, vol. 58(1), pages 141-168, June.
    15. Ladd, Helen F. & Yinger, John, 1994. "The Case for Equalizing Aid," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(1), pages 211-224, March.
    16. Ladd, Helen F. & Yinger, John, 1994. "The Case for Equalizing Aid," National Tax Journal, National Tax Association, vol. 47(1), pages 211-24, March.
    17. Guy Gilbert, 1996. "Le fédéralisme financier, perspectives de microéconomie spatiale," Revue Économique, Programme National Persée, vol. 47(2), pages 311-363.
    18. repec:dgr:rugsom:14023-eef is not listed on IDEAS
    19. Bergman, Malin, 2003. "Interregional Inequality and Robin Hood Politics," SSE/EFI Working Paper Series in Economics and Finance 523, Stockholm School of Economics.
    20. Kurt Schmidheiny, 2002. "Income Stratifcation in Multi-Community Models," Diskussionsschriften dp0215, Universitaet Bern, Departement Volkswirtschaft.
    21. Rockoff, Jonah E., 2010. "Local response to fiscal incentives in heterogeneous communities," Journal of Urban Economics, Elsevier, vol. 68(2), pages 138-147, September.

    More about this item

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:62:y:1996:i:3:p:363-397. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505578 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.