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Intergenerational Fiscal Constitutions: How to Protect Future Generations Using Land Taxes and Federalism

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  • John P. Conley
  • Antonio Rangel

Abstract

This paper studies how to design a fiscal constitution that, by capitalizing intergenerational spillovers into land values, is able to protect future generations from expropriation and to generate optimal investment in intergenerational public goods. In particular, we study how to accomplish these goals by changing two dimensions of the fiscal constitution: (1) the level of government to which different types of intergenerational public goods are assigned, and (2) the tax base of the different jurisdictions. We show that the instruments required to generate capitalization of the intergenerational spillovers depend on the type of the spillover. Land taxation is the essential instrument for policies that mostly generate fiscal spillovers, such as debt and public infrastructure. By contrast, interjurisdictional competition is the essential instrument for policies that mostly generate direct spillovers, such as irreversible environmental damages. Furthermore, we show that it is possible to design a fiscal constitution that generates full capitalization of fiscal spillovers, but in general, not one that generates full capitalization of direct spillovers.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8394.

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Date of creation: Jul 2001
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Publication status: published as John Conley & Antonio Rangel, 2001. "Intergenerational Fiscal Constitutions: How to Protect Future Generations Using Land Taxes and Federalism," Economics Bulletin, AccessEcon, vol. 28(17), pages A0.
Handle: RePEc:nbr:nberwo:8394

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  1. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1997. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(6), pages 1121-66, December.
  2. Dennis Epple & Katherine Schipper, 1981. "Municipal pension funding: A theory and some evidence," Public Choice, Springer, Springer, vol. 37(1), pages 141-178, January.
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Cited by:
  1. Paul R. Bergin & Reuven Glick, 2003. "Endogenous Tradability and Macroeconomic Implications," NBER Working Papers 9739, National Bureau of Economic Research, Inc.
  2. Hilber, Christian A. L., 2007. "New Housing Supply and the Dilution of Social Capital," MPRA Paper 5134, University Library of Munich, Germany.
  3. Marco Bassetto, 2008. "Public investment and budget rules for state vs. local governments," Working Paper Series, Federal Reserve Bank of Chicago WP-08-21, Federal Reserve Bank of Chicago.
  4. Hilber, Christian A.L. & Mayer, Christopher, 2009. "Why do households without children support local public schools? Linking house price capitalization to school spending," Journal of Urban Economics, Elsevier, vol. 65(1), pages 74-90, January.
  5. Reuven Glick & Paul Bergin, 2004. "Productivity and Tradability," 2004 Meeting Papers, Society for Economic Dynamics 327, Society for Economic Dynamics.
  6. Libman, Alexander, 2005. "Взаимодействие Государственных И Частных Структур В Интеграционных Группировах: Теоретические Подходы И Оп," MPRA Paper 17044, University Library of Munich, Germany.
  7. Marco Bassetto, 2009. "The Research Agenda: Marco Bassetto on the Quantitative Evaluation of Fiscal Policy Rules," EconomicDynamics Newsletter, Review of Economic Dynamics, Review of Economic Dynamics, vol. 10(2), April.

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