This paper analyzes taxes and transfers in an economy with three distinct levels of government. It is assumed that the different levels of government raise revenue through distortionary income taxation, resulting in vertical fiscal externalities. We show how to implement a socially optimal resource allocation when (i) the different levels of government act as Nash competitors to one another, and (ii) when one or several of the governmental entities act as Stackelberg leaders.
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Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 58 (2001) Issue (Month): 2 (February) Pages: 158- Download reference. The following formats are available: HTML
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Find related papers by JEL classification: D62 - Microeconomics - - Welfare Economics - - - Externalities H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
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