Vertical externalities with lump-sum taxes: how much difference does unemployment make?
AbstractThis paper analyses how the existence of unemployment affects the conventional approach to vertical externalities. We discuss the optimality rule for the provision of public inputs both in an unitary and a federal country. Our findings show that decentralizing the spending responsability on public inputs can bring its optimality rule closer to the production efficiency condition. Moreover, we describe the inability of the federal government, behaving as Stackelberg leader, to replicate the unitary outcome, unless to have new policy instruments at government’s disposal.
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Bibliographic InfoPaper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2012/25.
Length: 21 pages
Date of creation: 2012
Date of revision:
Public inputs; unemployment; vertical externalities;
Find related papers by JEL classification:
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
- H4 - Public Economics - - Publicly Provided Goods
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
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