Why do Differences in the Degree of Fiscal Decentralization Endure?
AbstractDifferences in the degree of fiscal decentralization observed between the U.S. and many countries in Europe cannot be explained within the standard theory of fiscal decentralization. By introducing preferences for solidarity – equality in the provision of public goods and services across regions – we show that different decentralization schemes can coexist as efficient choices. We develop a model of fiscal decentralization that incorporates tastes for solidarity, multiple levels of government, and various tax and transfer instruments. We find that when solidarity is added to the traditional fiscal-federalism framework, the choice along the decentralized-to-centralized spectrum shifts toward a more centralized system.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1877.
Date of creation: 2006
Date of revision:
Other versions of this item:
- Xavier Calsamiglia & Teresa Garcia-Milà & Therese J. McGuire, 2004. "Why do differences in the degree of fiscal decentralization endure?," Economics Working Papers 865, Department of Economics and Business, Universitat Pompeu Fabra.
- Xavier Calsamiglia & Teresa Garcia-Milà & Therese McGuire, 2004. "Why do Differences in the Degree of Fiscal Decentralization Endure?," Working Papers 193, Barcelona Graduate School of Economics.
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-02 (All new papers)
- NEP-PBE-2007-01-02 (Public Economics)
- NEP-POL-2007-01-02 (Positive Political Economics)
- NEP-URE-2007-01-02 (Urban & Real Estate Economics)
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