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Optimal income taxation and decentralized fiscal federalism

  • Aronsson, Thomas
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    This paper concerns redistribution and public good provision under asymmetric information, which are here ingredients of a policy-problem facing each member state (nation) of an economic federation with decentralized leadership. Each member state is assumed to have its own redistributive policy and pattern of public consumption, whereas the federal level redistributes (ex-post) between the member states. The results show how and why federal ex-post redistribution may modify the use of income taxation and public good provision at the national level, relative to the policy outcome in the absence of a federal government, as well as how the national policy incentives depend on whether or not the federal government uses distortionary taxes.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0166-0462(10)00010-4
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    Article provided by Elsevier in its journal Regional Science and Urban Economics.

    Volume (Year): 40 (2010)
    Issue (Month): 4 (July)
    Pages: 187-195

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    Handle: RePEc:eee:regeco:v:40:y:2010:i:4:p:187-195
    Contact details of provider: Web page: http://www.elsevier.com/locate/regec

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    23. Motohiro Sato, 2000. "Fiscal Externalities and Efficient Transfers in a Federation," International Tax and Public Finance, Springer, vol. 7(2), pages 119-139, March.
    24. Boadway, Robin & Keen, Michael, 1993. "Public Goods, Self-Selection and Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 463-78, August.
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    28. Efraim Sadka, 1976. "On Income Distribution, Incentive Effects and Optimal Income Taxation," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 261-267.
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