Vertical externalities in the provision of public inputs
This paper studies the provision of public inputs in a federal system. A vertical tax externality is also considered. A simple general equilibrium model is used to analyze the efficiency of the equilibria under different scenarios. The results show that the state provision of public inputs may affect ambiguously federal tax revenues, depending on vertical tax externality, among others things. Moreover, it is proved that achieving a second best allocation is not straightforward for a federal government that plays a Stackelberg leader.
|Date of creation:||2004|
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- Michael Keen, 1998.
"Vertical Tax Externalities in the Theory of Fiscal Federalism,"
IMF Staff Papers,
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- Michael Keen, 1997. "Vertical Tax Externalities in the Theory of Fiscal Federalism," IMF Working Papers 97/173, International Monetary Fund.
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in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 12, pages 677-789
- Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
- Robin Boadway & Michael Keen, 1996.
"Efficiency and the optimal direction of federal-state transfers,"
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Springer;International Institute of Public Finance, vol. 3(2), pages 137-155, May.
- Boadway, R & Keen, M, 1996. "Efficiency and the optimal direction of federal-state transfers," IFS Working Papers W96/01, Institute for Fiscal Studies.
- Motohiro Sato, 2000. "Fiscal Externalities and Efficient Transfers in a Federation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(2), pages 119-139, March.
- Dahlby, Bev & Wilson, Leonard S., 2003. "Vertical fiscal externalities in a federation," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 917-930, May.
- A. B. Atkinson & N. H. Stern, 1974. "Pigou, Taxation and Public Goods," Review of Economic Studies, Oxford University Press, vol. 41(1), pages 119-128.
- James P. Feehan, 2002. "Distortionary Taxation and Optimal Public Spending on Productive Activities," Economic Inquiry, Western Economic Association International, vol. 40(1), pages 60-68, January.
- B. Dahlby & L. S. Wilson, 1994. "Fiscal Capacity, Tax Effort, and Optimal Equalization Grants," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 657-672, August.
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