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General Income Taxation, Public Goods and Decentralized Leadership

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  • Aronsson, Thomas

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    (Department of Economics, Umeå University)

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    Abstract

    This paper concerns redistribution and public good provision under asymmetric information, which are here ingredients of a policy-problem facing each member state (nation) of an economic federation with decentralized leadership. Each member state is assumed to have its own redistributive policy and pattern of public consumption, whereas the federal level redistributes (ex-post) between the member states. The results show how and why federal ex-post redistribution may modify the use of income taxation and public good provision at the national level, relative to the policy outcome in the absence of a federal government, as well as how the national policy incentives depend on whether or not the federal government uses distortionary taxes.

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    Bibliographic Info

    Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 715.

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    Length: 29 pages
    Date of creation: 31 Aug 2007
    Date of revision:
    Handle: RePEc:hhs:umnees:0715

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    Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
    Phone: 090 - 786 61 42
    Fax: 090 - 77 23 02
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    Web page: http://www.econ.umu.se/
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    Keywords: Income taxation; redistribution; public goods; fiscal federalism; decentralized leadership;

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    1. Hansson, Ingemar & Stuart, Charles, 1987. "The suboptimality of local taxation under two-tier fiscal federalism," European Journal of Political Economy, Elsevier, vol. 3(3), pages 407-411.
    2. Dahlby, Bev & Wilson, Leonard S., 2003. "Vertical fiscal externalities in a federation," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 917-930, May.
    3. Thomas Aronsson & Tomas Sjögren, 2004. "Is the Optimal Labor Income Tax Progressive in a Unionized Economy?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(4), pages 661-675, December.
    4. repec:fth:louvco:9803 is not listed on IDEAS
    5. Caplan, Arthur J. & Silva, Emilson C. D., 1999. "Federal Acid Rain Games," Journal of Urban Economics, Elsevier, vol. 46(1), pages 25-52, July.
    6. BOADWAY, Robin & MARCHAND, Maurice & VIGNEAULT, Marianne, . "The consequences of overlapping tax bases for redistribution and public spending in a federation," CORE Discussion Papers RP -1326, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Anthony B. Atkinson, 1976. "Optimal Taxation and the Direct versus Indirect Tax Controversy," Working Papers 247, Queen's University, Department of Economics.
    8. Bev Dahlby, 1996. "Fiscal externalities and the design of intergovernmental grants," International Tax and Public Finance, Springer, vol. 3(3), pages 397-412, July.
    9. R. Boadway & K. Cuff & M. Marchand, 2001. "Equalization and the Decentralization of Revenue-Raising in a Federation," Department of Economics Working Papers 2001-04, McMaster University.
    10. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, vol. 6(4), pages 327-358, November.
    11. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
    12. Thomas Aronsson Aronsson & Thomas Jonsson & Tomas Sjögren, 2006. "Environmental Policy and Optimal Taxation in a Decentralized Economic Federation," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(3), pages 437-454, September.
    13. Robin Boadway and Michael Keen, . "Efficiency and the Optimal Direction of Federal-State Transfers," Economics Discussion Papers 445, University of Essex, Department of Economics.
    14. Caplan, Arthur J. & Cornes, Richard C. & Silva, Emilson C. D., 2000. "Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility," Journal of Public Economics, Elsevier, vol. 77(2), pages 265-284, August.
    15. Robin Boadway & Michael Keen, 1991. "Public Goods, Self-Selection and Optimal Income Taxation," Working Papers 828, Queen's University, Department of Economics.
    16. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
    17. Johnson, William R, 1988. "Income Redistribution in a Federal System," American Economic Review, American Economic Association, vol. 78(3), pages 570-73, June.
    18. Robin Boadway & Michael Keen, 1999. "Redistribution," Working Papers 983, Queen's University, Department of Economics.
    19. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
    20. Thomas Aronsson & Magnus Wikström, 2001. "Optimal Taxes and Transfers in a Multilevel Public Sector," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(2), pages 158-, February.
    21. Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
    22. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    23. Christiansen, Vidar, 1981. "Evaluation of Public Projects under Optimal Taxation," Review of Economic Studies, Wiley Blackwell, vol. 48(3), pages 447-57, July.
    24. Silva, Emilson C. D. & Caplan, Arthur J., 1997. "Transboundary Pollution Control in Federal Systems," Journal of Environmental Economics and Management, Elsevier, vol. 34(2), pages 173-186, October.
    25. Phelps, Edmund S, 1973. "Taxation of Wage Income for Economic Justice," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 331-54, August.
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