Vertical externalities in the provision of public inputs
AbstractThis paper studies the provision of public inputs in a federal system. A vertical tax externality is also considered. A simple general equilibrium model is used to analyze the efficiency of the equilibria under different scenarios. The results show that the state provision of public inputs may affect ambiguously federal tax revenues, depending on vertical tax externality, among others things. Moreover, it is proved that achieving a second best allocation is not straightforward for a federal government that plays a Stackelberg leader.
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Bibliographic InfoPaper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2004/47.
Length: 21 pages
Date of creation: 2004
Date of revision:
Fiscal federalism; vertical externality; productive public spending.;
Find related papers by JEL classification:
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H4 - Public Economics - - Publicly Provided Goods
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
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