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Earmarking: Bundling to Signal Quality

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  • Amihai Glazer

    ()
    (Department of Economics, University of California-Irvine)

  • Stef Proost

    ()
    (Faculty of Economics and Applied Economics, Catholic University of Leuven)

Abstract

Earmarking is a form of bundling in which government adopts a tax policy while specifying the uses of the revenue. This paper explores how bundling can enhance efficiency: it can inform the public of the quality of a program proposed, or of the quality of the agency that will be responsible for designing and implementing the program.We show that policies that appear inefficient in isolation may become justified when bundled.

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File URL: http://www.economics.uci.edu/files/economics/docs/workingpapers/2006-07/Glazer-13.pdf
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Bibliographic Info

Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 060713.

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Length: 15 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:irv:wpaper:060713

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Keywords: Earmarking; Asymmetric information; Bureaucracy; Project evaluation;

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  1. Bos, Dieter, 2000. "Earmarked taxation: welfare versus political support," Journal of Public Economics, Elsevier, vol. 75(3), pages 439-462, March.
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  13. Anesi, Vincent, 2006. "Earmarked taxation and political competition," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 679-701, May.
  14. David M. Newbery & Georgina Santos, 1999. "Road taxes, road user charges and earmarking," Fiscal Studies, Institute for Fiscal Studies, vol. 20(2), pages 103-132, June.
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  16. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 1999. "The Economics of Career Concerns, Part II: Application to Missions and Accountability of Government Agencies," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 199-217, January.
  17. Brett, Craig & Keen, Michael, 2000. "Political uncertainty and the earmarking of environmental taxes," Journal of Public Economics, Elsevier, vol. 75(3), pages 315-340, March.
  18. Dhillon, Amrita & Perroni, Carlo, 2001. "Tax earmarking and grass-roots accountability," Economics Letters, Elsevier, vol. 72(1), pages 99-106, July.
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