Advanced Search
MyIDEAS: Login

On states’ behavior with equalization grants

Contents:

Author Info

  • Diego Martínez López

    ()
    (Centro de Estudios Andaluces)

Abstract

This paper discusses how state government’s behaviour is affected when the so-called Representative Tax System (RTS) equalization scheme is implemented. In particular, we study the changes in the marginal cost of public funds (MCPF), and in the first order conditions for the optimal provision of public inputs. Following Smart (1998), those equalization transfers might create a price effect that induces the subnational governments to raise taxes. However, this result has to be qualified under certain assumptions. Also we find that there is an ambiguous relationship between the degree of fiscal equalization and the marginal cost of providing the public input and the level of taxation. In a sense, it is not clear that more redistribution necessarily leads to more inefficiency caused by higher taxes.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ief.es/documentos/recursos/publicaciones/revistas/hac_pub/174_StatesBehavior.pdf
Download Restriction: no

Bibliographic Info

Article provided by IEF in its journal Hacienda Pública Española/Revista de Economía Pública.

Volume (Year): 174 (2005)
Issue (Month): 3 (September)
Pages: 43-54

as in new window
Handle: RePEc:hpe:journl:y:2005:v:174:i:3:p:43-54

Contact details of provider:
Postal: Avda. Cardenal Herrera Oria, 378, 28035 Madrid
Phone: 91-339.89.15
Fax: 91-339.89.64
Email:
Web page: http://www.ief.es
More information through EDIRC

Related research

Keywords: Fiscal federalism; MCPF; vertical transfers;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. James P. Feehan, 2002. "Distortionary Taxation and Optimal Public Spending on Productive Activities," Economic Inquiry, Western Economic Association International, vol. 40(1), pages 60-68, January.
  2. Schob, Ronnie, 1994. "On Marginal Cost and Marginal Benefit of Public Funds," Public Finance = Finances publiques, , vol. 49(1), pages 87-106.
  3. Dahlby, Bev & Wilson, Leonard S., 2003. "Vertical fiscal externalities in a federation," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 917-930, May.
  4. Charles L. Ballard & Don Fullerton, 1992. "Distortionary Taxes and the Provision of Public Goods," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 117-131, Summer.
  5. Thiess Buettner, 2005. "The Incentive Effect of Fiscal Equalization Transfers on Tax Policy," CESifo Working Paper Series 1404, CESifo Group Munich.
  6. Robin Boadway & Michael Keen, 1996. "Efficiency and the optimal direction of federal-state transfers," International Tax and Public Finance, Springer, vol. 3(2), pages 137-155, May.
  7. Sam Bucovetsky & Michael Smart, 2002. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," CESifo Working Paper Series 767, CESifo Group Munich.
  8. Blackorby, Charles & Brett, Craig, 2000. "Fiscal Federalism Revisited," Journal of Economic Theory, Elsevier, vol. 92(2), pages 300-317, June.
  9. Baretti, Christian & Huber, Bernd & Lichtblau, Karl, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," Munich Reprints in Economics 20129, University of Munich, Department of Economics.
  10. Christian Baretti & Bernd Huber & Karl Lichtblau, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," International Tax and Public Finance, Springer, vol. 9(6), pages 631-649, November.
  11. Kotsogiannis, Christos & Makris, Miltiadis, 2002. "On production efficiency in federal systems," Economics Letters, Elsevier, vol. 76(2), pages 281-287, July.
  12. Atkinson, Anthony B & Stern, N H, 1974. "Pigou, Taxation and Public Goods," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 119-28, January.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hpe:journl:y:2005:v:174:i:3:p:43-54. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Olga Cantó Sánchez) The email address of this maintainer does not seem to be valid anymore. Please ask Olga Cantó Sánchez to update the entry or send us the correct address.

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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