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Centralized vs. Decentralized Redistribution: A Case for Interregional Transfer Mechanisms

  • Andreas Pfingsten
  • Andreas Wagener

According to conventional wisdom, Musgrave's “RedistributionBranch” should be assigned to the central level of governmentin a federation. Otherwise, fiscal externalities created by themobility of the poor would render decentralized redistributioninefficient, if not impossible. The paper objects to this viewand argues that decentralized intraregional redistribution canyield efficient outcomes if it is combined with cleverly designedinterregional transfer mechanisms. Within a general frameworkwe give necessary and sufficient conditions for interregionaltransfer schemes to implement efficient allocations as Nash equilibriaof a decentralized redistribution game. Copyright Kluwer Academic Publishers 1997

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Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 4 (1997)
Issue (Month): 4 (November)
Pages: 429-451

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Handle: RePEc:kap:itaxpf:v:4:y:1997:i:4:p:429-451
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  1. CREMER, Helmuth & FOURGEAUD, Virginie & LEITE MONTEIRO, Manuel & MARCHAND, Maurice, 1995. "Mobility and Redistribution : A Survey," CORE Discussion Papers 1995066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. John B. Burbidge & Gordon M. Myers, 1994. "Redistribution within and across the Regions of a Federation," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 620-36, August.
  3. Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," Munich Reprints in Economics 19846, University of Munich, Department of Economics.
  4. Charles Blackorby & David Donaldson & Maria Auersperg, 1981. "A New Procedure for the Measurement of Inequality within and among Population Subgroups," Canadian Journal of Economics, Canadian Economics Association, vol. 14(4), pages 665-85, November.
  5. Charles Brown & Wallace E. Oates, 1985. "Assistance to the Poor in a Federal System," NBER Working Papers 1715, National Bureau of Economic Research, Inc.
  6. Myers & G.M., 1989. "Optimality, Free Mobility And The Regional Authority In Federation," Working Papers 10, John Deutsch Institute for the Study of Economic Policy.
  7. Wildasin, D.E., 1992. "Income Restribution and Migration," Papers 92-003, Indiana - Center for Econometric Model Research.
  8. Bureau, Dominique & Champsaur, Paul, 1992. "Fiscal Federalism and European Economic Unification," American Economic Review, American Economic Association, vol. 82(2), pages 88-92, May.
  9. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-33, November.
  10. Buhl, Hans Ulrich & Pfingsten, Andreas, 1990. "On the distribution of public funds," European Journal of Political Economy, Elsevier, vol. 6(3), pages 363-376, December.
  11. Leonid Hurwicz, 1994. "Economic design, adjustment processes, mechanisms, and institutions," Review of Economic Design, Springer, vol. 1(1), pages 1-14, December.
  12. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
  13. Bhagwati, Jagdish N & Brecher, Richard A & Hatta, Tatsuo, 1983. "The Generalized Theory of Transfers and Welfare: Bilateral Transfers in a Multilateral World," American Economic Review, American Economic Association, vol. 73(4), pages 606-18, September.
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