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Modelling Tax Decentralisation And Regional Growth

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  • Ramiro Gil-Serrate

    ()
    (Universidad de Zaragoza)

  • Julio López-Laborda

    ()
    (Universidad de Zaragoza)

Abstract

. The aim of this paper is to determine a theoretical linkage between tax decentralisation and regional growth. For this purpose Zou’s (1996) analytical framework, which account for the potential effects of intergovernmental policies on regional growth, is considered. In this context a tax decentralisation indicator with a flypaper effect is introduced and a Cobb-Douglas form for the production technology is specified. As a consequence an optimal level of tax decentralisation for regional growth is obtained, it depends on private and public capital productivities, the tax burden rate in the absence of decentralisation and the intensity of the flypaper effect. Finally a hypothesis for the Spanish economy is obtained. It will be checked empirically in subsequent work.

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Paper provided by Instituto de Estudios Fiscales in its series Working Papers with number 14-05 Classification-JEL : H77, O41, R13..

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Handle: RePEc:hpe:wpaper:y:2005:i:14

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Keywords: tax decentralisation; general equilibrium analysis; regional growth.;

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  8. Davoodi, Hamid & Zou, Heng-fu, 1998. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," Journal of Urban Economics, Elsevier, vol. 43(2), pages 244-257, March.
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  11. Jorge Martinez-Vazquez & Robert McNab, 2005. "Fiscal Decentralization,Macrostability, and Growth," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0506, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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  22. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, vol. 46(2), pages 207-27, June.
  23. Raj M. Desai & Lev M. Freinkman & Itzhak Goldberg, 2003. "Fiscal federalism and regional growth : evidence from the Russian Federation in the 1990s," Policy Research Working Paper Series 3138, The World Bank.
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