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A Theory of Distributional Conflict, Voluntarism and Segregation

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Author Info
Horstmann, Ignatius J
Scharf, Kimberley Ann

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Abstract

Along with the rise in income inequality in the US, there is evidence of a simultaneous move toward fiscal devolution and increased government reliance on private provision of public goods. This Paper argues that these phenomena are related. We describe a model of jurisdiction and policy formation in which the structure of government provision is endogenous and public good provision levels are determined by a political process that can exploit private motives for voluntary giving. The model predicts that an increase in income inequality leads to decentralization, with local jurisdictions becoming more income-homogeneous than the population as a whole. This reduction in local income heterogeneity, combined with a reduced tax base, results in increased reliance by government on private provision.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3625.

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Date of creation: Nov 2002
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Handle: RePEc:cpr:ceprdp:3625

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Related research
Keywords: fiscal federalism; jurisdiction formation; private provision of public goods;

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Find related papers by JEL classification:
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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  15. Fernandez, Raquel & Rogerson, Richard, 1997. "Keeping People Out: Income Distribution, Zoning, and the Quality of Public Education," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 23-42, February.
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