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Redistribution and Administrative Federalism

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  • Robert Schwager

Abstract

In this paper, redistribution is studied in the presence of migration externalities. Administrative federalism is defined as a constitution where statutory tax and transfer levels are set nationally, while local administrations may refuse to pay the transfer or rebate the tax in single cases, thereby introducing horizontal inequity. With risk aversion, this is less attractive than reducing the level of redistribution in a horizontally equal way. It is shown that administrative federalism leads to higher transfers and higher utilitarian welfare than decentralized decisions, that it may implement the first-best solution, and that horizontal inequality never occurs in equilibrium.

Suggested Citation

  • Robert Schwager, 1997. "Redistribution and Administrative Federalism," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1161-1183, November.
  • Handle: RePEc:cje:issued:v:30:y:1997:i:4:p:1161-83
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    Cited by:

    1. Kraus, Margit & Hölsch, Katja, 2002. "European schemes of social assistance: an empirical analysis of set-ups and distributive impacts," ZEW Discussion Papers 02-51, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Katja Hoelsch & Margit Kraus, 2003. "Poverty Alleviation and the Degree of Centralisation in European Schemes of Social Assistance," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 219/2003, Department of Economics, University of Hohenheim, Germany.
    3. Margit Kraus & Katja Hölsch, 2002. "European Schemes of Social Assistance: An Empirical Analysis of Set-Ups and Distributive Impacts," LIS Working papers 312, LIS Cross-National Data Center in Luxembourg.
    4. Margit Kraus & Katja Hölsch, 2003. "Poverty Alleviation and the Degree of Centralisation in European Schemes of Social Assistance," LIS Working papers 342, LIS Cross-National Data Center in Luxembourg.
    5. Kraus, Margit & Hölsch, Katja, 2003. "Poverty Alleviation and the Degree of Centralisation in European Schemes of Social Assistance," ZEW Discussion Papers 03-16, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Thiess Büttner & Petra Enß & Fédéric Holm-Hadulla & Robert Schwager & Christiane Starbatty & Wiebke Webering, 2010. "Der kommunale Finanzausgleich in Mecklenburg-Vorpommern : langfristige Entwicklung und Reformperspektiven ; Teil I: Der vertikale Finanzausgleich ; Gutachten im Auftrag des Innenministeriums des Lande," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 45, October.

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