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Would less regional income distribution justify the present call for devolution?

Author

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  • Rosella Levaggi

    (University of Brescia)

  • Francesco Menoncin

    (University of Brescia)

Abstract

We model a local public good with spillovers, in a framework where devolution is socially inefficient. Nevertheless, we show that decentralisation may be preferred by one region if it implies a reduction in regional income redistribution. This result is due to the inter-regional mechanism of the equalisation grant. For an expenditure-based grant, we define a threshold for regional income disparity above which decentralisation is preferred, while for a resource-based grant the threshold depends on the spillover and the difference in preferences for the local public good. Finally, for given levels of regional income disparity we show which grant form may minimise the claims for decentralisation.

Suggested Citation

  • Rosella Levaggi & Francesco Menoncin, 2017. "Would less regional income distribution justify the present call for devolution?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 780-799, September.
    • Handle: RePEc:kap:itaxpf:v:24:y:2017:i:5:d:10.1007_s10797-016-9436-x
    DOI: 10.1007/s10797-016-9436-x
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    More about this item

    Keywords

    Devolution; Equalisation grant; Regional income distribution;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H4 - Public Economics - - Publicly Provided Goods

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