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

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  • Andreas Pfingsten
  • Andreas Wagener

Abstract

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

Suggested Citation

  • Andreas Pfingsten & Andreas Wagener, 1997. "Centralized vs. Decentralized Redistribution: A Case for Interregional Transfer Mechanisms," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(4), pages 429-451, November.
    • Handle: RePEc:kap:itaxpf:v:4:y:1997:i:4:p:429-451
    DOI: 10.1023/A:1008656830324
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    References listed on IDEAS

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    Cited by:

    1. Ana B. Ania & Andreas Wagener, 2021. "Laboratory federalism with public funds sharing," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1047-1065, July.
    2. Jacques H. Drèze & Charles Figuieres & Jean Hindriks, 2007. "Can Federal Grants Mitigate Social Competition?," CESifo Economic Studies, CESifo, vol. 53(4), pages 596-617, December.
    3. Santiago Lago-Peñas & Albino Prada & Alberto Vaquero, 2015. "On the size and determinants of inter-regional redistribution in European countries over the period 1995–2009," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(4), pages 845-864, November.
    4. Figuieres, Charles & Hindriks, Jean, 2002. "Matching grants and Ricardian equivalence," Journal of Urban Economics, Elsevier, vol. 52(1), pages 177-191, July.
    5. Jacques H. Drèze & Charles Figuières & Jean Hindriks, 2006. "Voluntary Matching Grants Can Forestall Social Dumping," CESifo Working Paper Series 1867, CESifo.
    6. Parviainen, Seija, 1998. "Redistribution and Risk Sharing in EMU," Discussion Papers 159, VATT Institute for Economic Research.
    7. Horst Raff & John Wilson, 1997. "Income Redistribution with Well-Informed Local Governments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(4), pages 407-427, November.
    8. Traub, Stefan, 2003. "Federalism, Freedom of Movement, and Fiscal Equalization," Economics Working Papers 2003-06, Christian-Albrechts-University of Kiel, Department of Economics.
    9. Leonzio Rizzo, 2006. "Le inefficienze della competizione fiscale: una rassegna dei principali modelli teorici," Economia politica, Società editrice il Mulino, issue 1, pages 89-120.
    10. Ana B. Ania & Andreas Wagener, 2021. "Laboratory federalism with public funds sharing," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1047-1065, July.
    11. Wagener, Andreas, 2000. "Variable population size issues in models of decentralized income redistribution," Regional Science and Urban Economics, Elsevier, vol. 30(6), pages 609-625, December.
    12. Feld, Lars P, 2000. "Tax Competition and Income Redistribution: An Empirical Analysis for Switzerland," Public Choice, Springer, vol. 105(1-2), pages 125-164, October.
    13. Figuieres, Charles & Hindriks, Jean, 2002. "Matching grants and Ricardian equivalence," Journal of Urban Economics, Elsevier, vol. 52(1), pages 177-191, July.

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