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Leviathans, federal transfers, and the cartelization hypothesis

  • Marko Köthenbürger

    ()

Federal fiscal arrangements are argued to give rise to tacit collusion among competing Leviathans (Brennan and Buchanan, The Power to Tax, CUP, 1980). Though frequently encountered in academic and policy discussions, the cartelization hypothesis has rarely been scrutinized formally. This paper explores the effect of federal equalizing transfers on Leviathans engaged in tax competition. Contrary to the hypothesis, equalization is found to potentially complement tax competition in taming the Leviathan by implicitly taxing tax revenues extracted by the Leviathan. Thus, transfers might be an appropriate constitutional provision against fiscal expropriation. Copyright Springer Science + Business Media, Inc. 2005

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File URL: http://hdl.handle.net/10.1007/s11127-005-7518-x
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Article provided by Springer in its journal Public Choice.

Volume (Year): 122 (2005)
Issue (Month): 3 (March)
Pages: 449-465

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Handle: RePEc:kap:pubcho:v:122:y:2005:i:3:p:449-465
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100332

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  1. Grossman, Philip J & West, Edwin G, 1994. " Federalism and the Growth of Government Revisited," Public Choice, Springer, vol. 79(1-2), pages 19-32, April.
  2. Baretti, Christian & Huber, Bernd & Lichtblau, Karl, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," Munich Reprints in Economics 20129, University of Munich, Department of Economics.
  3. Matthias Wrede, 2000. "Shared Tax Sources and Public Expenditures," International Tax and Public Finance, Springer, vol. 7(2), pages 163-175, March.
  4. Sam Bucovetsky & Michael Smart, 2002. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," CESifo Working Paper Series 767, CESifo Group Munich.
  5. Michael Keen, 1998. "Vertical Tax Externalities in the Theory of Fiscal Federalism," IMF Staff Papers, Palgrave Macmillan, vol. 45(3), pages 454-485, September.
  6. Roger H. Gordon & John D. Wilson, 2001. "Expenditure Competition," NBER Working Papers 8189, National Bureau of Economic Research, Inc.
  7. Epple, Dennis & Zelenitz, Allan, 1981. "The Implications of Competition among Jurisdictions: Does Tiebout Need Politics?," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1197-1217, December.
  8. repec:cup:cbooks:9780521027922 is not listed on IDEAS
  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. Marko Köthenbürger, 2002. "Tax Competition and Fiscal Equalization," International Tax and Public Finance, Springer, vol. 9(4), pages 391-408, August.
  11. James M. Buchanan, 1952. "Federal Grants and Resource Allocation," Journal of Political Economy, University of Chicago Press, vol. 60, pages 208.
  12. Jeremy Edwards & Michael Keen, 1994. "Tax competition and Leviathon," IFS Working Papers W94/07, Institute for Fiscal Studies.
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