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The cost of regional equity in Denmark: Goal attainment or incentive distortions

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  • Schmidt, Torben Dall

Abstract

National governments often delegate tasks and burdens to lower levels in a comprehensive system of administration. Local and regional governance thereby become an important factor in policy implementation. This paper focuses on the incentive problem that follows from the delegation of competences to collect taxes to the local level in a multi†level geo†administrative system. The paper uses the Danish administrative system to illustrate the actual outcomes from such incentive problems. It focuses on goal attainment in the presence of decentralised financing and offers policy recommendations with respect to policy design within decentralised financing systems. Setting up elaborate administrative systems will introduce agency problems in terms of financing that lead to inefficiencies in both local and national governance.

Suggested Citation

Handle: RePEc:eee:paresc:v:87:y:2008:i:4:p:567-588
DOI: 10.1111/j.1435-5957.2008.00172.x
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JEL classification:

  • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
  • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
  • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
  • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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