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Interregional Disparities in Productivity and the Choice of Fiscal Regime

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Author Info
Kimiko Terai () (Hosei University)
Abstract

Two districts with divergent productivity levels engage in policy-making on the provision of local public goods that enhance future income and hence create a dynamic linkage across periods. The policy choices of district representatives are derived under alternative fiscal systems, and the problem of system selection is examined. It is shown that a decentralized system is more likely to be selected in a more equal society. On the other hand, when a great deal of benefit spills over from a local public good, or when policy makers are expected to care solely about the immediate effects of their decisions on their districts, a centralized system is more likely to be selected.

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Publisher Info
Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 070813.

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Length: 37 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:irv:wpaper:070813

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Related research
Keywords: Interregional and intergenerational spillovers; Decentralization; Centralization; Disparity in productivity; Dynamic political economy model;

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Find related papers by JEL classification:
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
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
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