Nicolas Gravel () (Centre de Sciences Humaines (CSH), Delhi & IDEP-GREQAM) Michel Poitevin () (CIREQ and Department of economics, université de Montréal)
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We investigate the conditions under which an inequality averse and additively separable welfarist constitution maker would always choose to set up a progressive equalization payment scheme in a federation with local public goods. A progressive equalization payment scheme is defined as a list of per capita net (possibly negative) subsidies – one such net subsidy for every jurisdiction - that are decreasing with respect to jurisdictions per capita wealth. We examine the question in a setting in which the case for progressivity is a priori the strongest, namely, all citizens have the same utility function for the private good and the public good, inhabitants of a given jurisdiction are all identicals and are not able to move accross jurisdictions. We show that a necessary and sufficient condition that the objective function of the constitution maker must satisfy to favour a progressive equalization payment scheme for all distributions of wealth and all population sizes is to be additively separable between each jurisdiction’s per capita wealth and number of inhabitants. When interpreted for a mean of order social welfare function, this condition is shown to be equivalent to additive separability of the individual’s indirect utility function with respect to wealth and the price of the public good. Some implications of this restriction to the case where the citizens direct utility function is additively separable are also derived.
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Paper provided by Institut d'economie publique (IDEP), Marseille, France in its series IDEP Working Papers with number
0408.
Find related papers by JEL classification: D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement H10 - Public Economics - - Structure and Scope of Government - - - General H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation H41 - Public Economics - - Publicly Provided Goods - - - Public Goods H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Blackorby, Charles & Bossert, Walter & Donaldson, David, 2002.
"Utilitarianism and the theory of justice,"
Handbook of Social Choice and Welfare,
in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 11, pages 543-596
Elsevier.
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