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Abstract

In this paper, we analyze a class of models in which there are interjurisdictional spillovers among heterogeneous jurisdictions, as illustrated for instance by CO2 emissions that affect the global environment. Each jurisdiction’s emissions depend upon the local stock of private capital. Capital is interjurisdictionally-mobile and may be taxed to help finance local public expenditures. We show that decentralized policymaking leads to efficient resource allocations in important cases, even in the complete absence of corrective interventions by higher-level governments or coordination of policy through Coasian bargaining. In particular, even when the preferences and production technologies differ among the agents, the decentralized system can still result in globally efficient allocation.

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Paper provided by University of Kentucky, Institute for Federalism and Intergovernmental Relations in its series Working Papers with number 2007-06.

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Length: 30 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:ifr:wpaper:2007-06

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Find related papers by JEL classification:

• H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
• H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
• D62 - Microeconomics - - Welfare Economics - - - Externalities

This paper has been announced in the following NEP Reports:

• NEP-ALL-2007-08-27 (All new papers)
• NEP-PBE-2007-08-27 (Public Economics)
• NEP-URE-2007-08-27 (Urban & Real Estate Economics)

References

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Cited by:

1. James Alm & H. Spencer Banzhaf, 2011. "Designing Economic Instruments for the Environment in a Decentralized Fiscal System," Working Papers 1104, Tulane University, Department of Economics.
   
   • James Alm & H. Spencer Banzhaf, 2012. "Designing Economic Instruments For The Environment In A Decentralized Fiscal System," Journal of Economic Surveys, Wiley Blackwell, vol. 26(2), pages 177-202, 04.
   • Alm, James & Banzhaf, H. Spencer, 2007. "Designing economic instruments for the environment in a decentralized fiscal system," Policy Research Working Paper Series 4379, The World Bank.
2. Hikaru Ogawa & David Wildasin, 2007. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking," Working Papers 2007-06, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
   
   • Hikaru Ogawa & David E. Wildasin, 2009. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking," American Economic Review, American Economic Association, vol. 99(4), pages 1206-17, September.
   • Hikaru Ogawa & David E. Wildasin, 2007. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking," CESifo Working Paper Series 2142, CESifo Group Munich.
3. Antoine D'Autume & Katheline Schubert & Cees Withagen, 2011. "Should the carbon price be the same in all countries ?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00654239, HAL.
   
   • Antoine d'Autume & Katheline Schubert & Cees Withagen, 2011. "Should the carbon price be the same in all countries ?," Documents de travail du Centre d'Economie de la Sorbonne 11076, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
4. Marco Runkel & Thomas Eichner, 2010. "Interjurisdictional Spillovers, Decentralized Policymaking and the Elasticity of Capital Supply," FEMM Working Papers 100019, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
   
   • Thomas Eichner & Marco Runkel, 2012. "Interjurisdictional Spillovers, Decentralized Policymaking, and the Elasticity of Capital Supply," American Economic Review, American Economic Association, vol. 102(5), pages 2349-57, August.
   • Thomas Eichner & Marco Runkel, 2010. "Interjurisdictional Spillovers, Decentralized Policymaking and the Elasticity of Capital Supply," CESifo Working Paper Series 3214, CESifo Group Munich.
5. Harrie A. A Verbon & Cees A. Withagen, 2010. "Do Permit Allocations Matter?," CESifo Working Paper Series 3236, CESifo Group Munich.
6. Rosella Levaggi, 2009. "From local to global public goods: how should externalities be represented?," Working Papers 0903, University of Brescia, Department of Economics.
   
   • Levaggi, Rosella, 2010. "From local to global public goods: How should externalities be represented?," Economic Modelling, Elsevier, vol. 27(5), pages 1040-1042, September.
7. Marco Runkel & Thomas Eichner, 2010. "Subsidizing Renewable Energy under Capital Mobility," FEMM Working Papers 100020, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
   
   • Thomas Eichner & Marco Runkel, 2010. "Subsidizing Renewable Energy under Capital Mobility," CESifo Working Paper Series 3185, CESifo Group Munich.
8. Rosella Levaggi, 2008. "Decentralisation vs fiscal federalism in the presence of impure public goods," Working Papers 0812, University of Brescia, Department of Economics.
9. Caragliu, Andrea & Del Bo, Chiara, 2011. "Determinants of spatial knowledge spillovers in Italian provinces," Socio-Economic Planning Sciences, Elsevier, vol. 45(1), pages 28-37, March.

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