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Tax Federalism And Cooperative Games: Stability Analysis

Author

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  • Emilio Calvo

    (Universidad de Valencia. ERI-CES)

Abstract

This paper is devoted to analyzing the problem of how to distribute the public spending among the different regions of a country once all taxes are collected. We model the problem as a cooperative game in coalitional form. For that purpose, we need to specify how much tax is collected in every region (and coalition of regions) in the country under secession. In this way, we obtain the tax game of the problem, and its core is given by the set of stable tax allocations. Following such an approach, we are able to analyze the stability of a tax financing system. The Spanish case is considered and we show that the present regional financial system is unstable from this perspective.

Suggested Citation

  • Emilio Calvo, 2018. "Tax Federalism And Cooperative Games: Stability Analysis," Discussion Papers in Economic Behaviour 0118, University of Valencia, ERI-CES.
  • Handle: RePEc:dbe:wpaper:0118
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    File URL: https://www.uv.es/erices/RePEc/WP/2018/0118.pdf
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    More about this item

    Keywords

    fiscal federalism; fiscal stability; secessionism; coalitional games;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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