Economic Risk and Political Risk in Fiscal Unions
AbstractA fiscal programme that redistributes income from rich to poor individuals indirectly redistributes tax revenues from regions hit by a favourable shock to regions hit by an unfavourable one. Centralised fiscal redistribution has therefore been advocated as a way to insure individuals against region-specific shocks. In this paper, we argue that a centralised fiscal policy, while reducing the uncertainty on the tax base, may create additional uncertainty on the tax rate. Using a simple model we show that the higher uncertainty on the policy instrument might more than offset the lower uncertainty on the tax base.
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Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 4553022.
Date of creation: 1994
Date of revision:
Publication status: Published in Economic Journal
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- Perotti, Roberto & Spolaore, Enrico & Alesina, Alberto, 1995.
"Together or Separately? Issues on the Costs and Benefits of Political and Fiscal Unions,"
4553017, Harvard University Department of Economics.
- Alesina, Alberto & Perotti, Roberto & Spolaore, Enrico, 1995. "Togetheror separately? Issues on the costs and benefits of political and fiscal unions," European Economic Review, Elsevier, vol. 39(3-4), pages 751-758, April.
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