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Redistributing Income Under Fiscal Vertical Imbalance

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  • Marjorie Gassner
  • Laurent Bouton
  • Vincenzo Verardi

Abstract

From the literature on decentralization, it appears that the fiscal vertical imbalance is somehow inherent to multi-level governements. Using a stylized model we show that this leads to a reduction in the extent of redistributive fiscal policies if the maximal tolerable size of government has been reached. To test this empirically we use some high quality data, from the LIS dataset, on individual incomes. The results are highly significant and point in the direction of our theoretical predictions.

Suggested Citation

  • Marjorie Gassner & Laurent Bouton & Vincenzo Verardi, 2007. "Redistributing Income Under Fiscal Vertical Imbalance," LIS Working papers 420, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:420
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    1. Bruno De Borger & Vincenzo Verardi, 2009. "Estimating the direct costs of social conflicts: Road blockings in Bolivia," Journal of International Development, John Wiley & Sons, Ltd., vol. 21(7), pages 932-946.

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