Fiscal federalism and soft budget constraint: does the nature of public spending matter?
AbstractThis paper analyses the impact of both the nature of regional public spending and the federal government’s fiscal tools on the softness of the regional budget constraint and the regional provision of public good. We show that i) whatever the nature of regional public spending, the regional budget constraint is harder when the federal government can no longer manipulate its lump sum tax and ii) under the assumption that the federal government can no longer manipulate its lump sum tax, the federal bailout is lower when the region provides a public input rather than a public good but the regional budget constraint can be either softer or harder.
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Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2007-16.
Length: 17 pages
Date of creation: 2007
Date of revision:
Soft Budget Constraint; Fiscal Federalism; Tax Competition; Public Input;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-30 (All new papers)
- NEP-GEO-2007-06-30 (Economic Geography)
- NEP-MAC-2007-06-30 (Macroeconomics)
- NEP-URE-2007-06-30 (Urban & Real Estate Economics)
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