Centralization Trade-off with Non-Uniform Taxation
AbstractWhen local public goods are provided by a centralized authority, spillovers are internalized, but heterogeneity in preferences may be suppressed. Besley and Coate (2003) recently examined this classic trade-off for a uniform tax regime with strategic delegation. Here, we extend their approach by allowing for a non-uniform tax regime. We find that centralization with nonuniform taxation unambiguously increases welfare in comparison to uniform-tax centralization. With non-cooperative legislators coming from symmetric districts, our centralization dominates decentralization for any degree of spillovers. In other cases, non-uniform taxation at least improves the odds of centralization, if measured by a utilitarian yardstick.
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Bibliographic InfoArticle provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its journal AUCO Czech Economic Review.
Volume (Year): 1 (2007)
Issue (Month): 3 (November)
Find related papers by JEL classification:
- H40 - Public Economics - - Publicly Provided Goods - - - General
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
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