On the states' behavior with equalization grants
This paper discusses how the state government's behavior is affected when the so-called Representative Tax System (RTS) equalization scheme is implemented. In particular, we study the changes in the marginal cost of the public funds (MCPF), and in the first order conditions for the optimal provision of a public input. A reduction in the MCPF is to be expected when lump-sum grants are replaced by RTS equalization transfers. However, this result has to be qualified under certain assumptions. Also we find that there does not exist an unambiguous relationship between the degree of fiscal equalization and the marginal cost of providing the public input and the tax setting. Production efficiency condition in the provision of public inputs holds with both types of vertical transfers.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: c/ Bailén 50. 41001 Sevilla|
Phone: (34) 955 055 210
Fax: (34) 955 055 211
Web page: http://www.centrodeestudiosandaluces.es
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sam Bucovetsky & Michael Smart, 2006.
"The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 8(1), pages 119-144, 01.
- 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.
- 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.
- Michael Smart, 1998. "Taxation and Deadweight Loss in a System of Intergovernmental Transfers," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 189-206, February.
- Buettner, Thiess, 2006.
"The incentive effect of fiscal equalization transfers on tax policy,"
Journal of Public Economics,
Elsevier, vol. 90(3), pages 477-497, February.
- Büttner, Thiess, 2005. "The Incentive Effect of Fiscal Equalization Transfers on Tax Policy," Center for European, Governance and Economic Development Research Discussion Papers 37, University of Goettingen, Department of Economics.
- Thiess Buettner, 2005. "The Incentive Effect of Fiscal Equalization Transfers on Tax Policy," CESifo Working Paper Series 1404, CESifo Group Munich.
- Alejandro Esteller & Albert Solé, 2001.
"Tax Setting in a Federal System: The Case of Personal Income Taxation in Canada,"
2001/9, Institut d'Economia de Barcelona (IEB).
- Alejandro Esteller-Moré & Albert Solé-Ollé, 2002. "Tax Setting in a Federal System: The Case of Personal Income Taxation in Canada," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(3), pages 235-257, May.
- Mutsumi Matsumoto, 2000. "A Note on the Composition of Public Expenditure under Capital Tax Competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(6), pages 691-697, December.
- Matsumoto, Mutsumi, 2004. "The mix of public inputs under tax competition," Journal of Urban Economics, Elsevier, vol. 56(2), pages 389-396, September.
- Christian Baretti & Bernd Huber & Karl Lichtblau, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(6), pages 631-649, November.
- Martínez-López, Diego, 2005. "Fiscal federalism and public inputs provision: vertical externalities matter," Working Paper Series 0484, European Central Bank.
- Bev Dahlby & Neil Warren, 2003. "Fiscal Incentive Effects of the Australian Equalisation System," The Economic Record, The Economic Society of Australia, vol. 79(247), pages 434-445, December.
- 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.
- Boadway, R & Keen, M, 1996.
"Efficiency and the optimal direction of federal-state transfers,"
IFS Working Papers
W96/01, Institute for Fiscal Studies.
- Robin Boadway & Michael Keen, 1996. "Efficiency and the optimal direction of federal-state transfers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(2), pages 137-155, May.
- Blackorby, Charles & Brett, Craig, 2000. "Fiscal Federalism Revisited," Journal of Economic Theory, Elsevier, vol. 92(2), pages 300-317, June.
- 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.
- Kotsogiannis, Christos & Makris, Miltiadis, 2002. "On production efficiency in federal systems," Economics Letters, Elsevier, vol. 76(2), pages 281-287, July.
When requesting a correction, please mention this item's handle: RePEc:cea:doctra:e2005_03. 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: (Susana Mérida)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.