IDEAS home Printed from https://ideas.repec.org/p/ags/queddp/273377.html
   My bibliography  Save this paper

A Second Best Theory of a Fiscal Federal System

Author

Listed:
  • Sato, Motohiro

Abstract

This paper investigates properties of the second best allocation in a scal federal system in which both federal tax and intergovernmental grants are involved and the taxation is distortionary We extend the analysis of Boadway and Keen and Dahlby and Wilson by introducing both imperfect mobility and heterogeneous regions In contrast to the outcomes in the existing works we nd i the second best does not require the equalization of the conventional MCPFs between regions ii in order to replicate the second best matching grants based on either the local tax rates or tax revenues should be introduced to internalize the tax externality and iii federal tax policy is redundant once the intergovernmental grants are optimized The irrelevancy of the federal tax implies that optimal scal gap is indeterminate Therefore it will be argued that the standard framework of scal federal model in the literature does not provide a rationale for either decentralization or centralization of the tax system once the federal government is allowed to use sucient instruments of inter regional transfers

Suggested Citation

  • Sato, Motohiro, 1997. "A Second Best Theory of a Fiscal Federal System," Queen's Institute for Economic Research Discussion Papers 273377, Queen's University - Department of Economics.
  • Handle: RePEc:ags:queddp:273377
    DOI: 10.22004/ag.econ.273377
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/273377/files/qed_wp_943.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.273377?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Esteller-More, Alex & Sole-Olle, Albert, 2001. "Vertical income tax externalities and fiscal interdependence: evidence from the US," Regional Science and Urban Economics, Elsevier, vol. 31(2-3), pages 247-272, April.
    2. Boadway, Robin & Marchand, Maurice & Vigneault, Marianne, 1998. "The consequences of overlapping tax bases for redistribution and public spending in a federation," Journal of Public Economics, Elsevier, vol. 68(3), pages 453-478, June.

    More about this item

    Keywords

    Financial Economics;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:queddp:273377. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/qedquca.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/qedquca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.