Leviathans, Federal Transfers, and the Cartelization Hypothesis
AbstractFederal fiscal arrangements are argued to give rise to tacit collusion among competing Leviathans (Brennan and Buchanan, The Power to Tax, CUP, 1980). Though frequently encountered in academic and policy discussions, the cartelization hypothesis has rarely been scrutinized formally. This paper explores the effect of federal equalizing transfers on Leviathans engaged in tax competition. Contrary to the hypothesis, equalization is found to potentially complement tax competition in taming the Leviathan by implicitly taxing tax revenues extracted by the Leviathan. Thus, transfers might be an appropriate constitutional provision against fiscal expropriation.JEL classification: H7, H1, H20
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1180.
Date of creation: 2004
Date of revision:
Leviathan; fiscal transfers; fiscal competition; federalism; constitution;
Other versions of this item:
- Marko Köthenbürger, 2005. "Leviathans, federal transfers, and the cartelization hypothesis," Public Choice, Springer, vol. 122(3), pages 449-465, March.
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
- H1 - Public Economics - - Structure and Scope of Government
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-02 (All new papers)
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