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Fairness and decentralization : a tale of two countries

Author

Listed:
  • Fabio Padovano

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

Abstract

Fairness is advocated to justify policies of equalization of income levels across regions of the same country. Normative welfare economic theories maintain that the central government should carry out these policies as decentralization would exacerbate regional income gaps. These theories neglect that market forces too may produce convergence of regional incomes; their interplay with fiscal equalization policies has not been examined thoroughly. Using data from a highly centralized country (Italy) and a highly decentralized one (the U. S.) the analysis demonstrates that fiscal policies can forestall convergence driven by market forces and that decentralization can be associated with the choice of fiscal policies compatible with market-induced convergence of regional incomes.

Suggested Citation

  • Fabio Padovano, 2012. "Fairness and decentralization : a tale of two countries," Post-Print halshs-00908634, HAL.
    • Handle: RePEc:hal:journl:halshs-00908634
    as

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