Should the Power to Redistribute Income be (De-)Centralized? An Example
This paper deals with two questions which have recentlyreceived considerable attention in both the political debateand the academic literature: First, are fiscal programs largeror smaller when they are (de-)centralized? Second, should suchprograms be (de-)centralized? We answer these questions withina politico-economic model in which voters choose the parametersof a linear income tax taking into account how taxes affect laborsupply and migration decisions. It is shown that a decentralizedpolitical system may lead to a smaller government budget. Theconcept of a veil of ignorance is used to analyze the desirabilityof a decentralized system. It is argued that a decentralizedsystem is preferred under the veil of ignorance only if individualsare not too risk-averse and the income distribution is not toopolarized. Copyright Kluwer Academic Publishers 1997
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Volume (Year): 4 (1997)
Issue (Month): 4 (November)
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- Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
- John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63, pages 309.
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- Patrick J. Kehoe, 1989. "Policy Cooperation Among Benevolent Governments May Be Undesirable," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 289-296.
- Persson, Torsten & Tabellini, Guido, 1994. "Does centralization increase the size of government?," European Economic Review, Elsevier, vol. 38(3-4), pages 765-773, April.
- Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
- Bolton, Patrick & Roland, Gerard, 1996. "Distributional Conflicts, Factor Mobility, and Political Integration," American Economic Review, American Economic Association, vol. 86(2), pages 99-104, May.
- Epple, Dennis & Filimon, Radu & Romer, Thomas, 1984. "Equilibrium among local jurisdictions: toward an integrated treatment of voting and residential choice," Journal of Public Economics, Elsevier, vol. 24(3), pages 281-308, August.
- Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
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