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A Theory of Distributional Conflict, Voluntarism and Segregation

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  • Horstmann, Ignatius J
  • Scharf, Kimberley

Abstract

Along with the rise in income inequality in the US, there is evidence of a simultaneous move toward fiscal devolution and increased government reliance on private provision of public goods. This Paper argues that these phenomena are related. We describe a model of jurisdiction and policy formation in which the structure of government provision is endogenous and public good provision levels are determined by a political process that can exploit private motives for voluntary giving. The model predicts that an increase in income inequality leads to decentralization, with local jurisdictions becoming more income-homogeneous than the population as a whole. This reduction in local income heterogeneity, combined with a reduced tax base, results in increased reliance by government on private provision.

Suggested Citation

  • Horstmann, Ignatius J & Scharf, Kimberley, 2002. "A Theory of Distributional Conflict, Voluntarism and Segregation," CEPR Discussion Papers 3625, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3625
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    Cited by:

    1. Michele Giuseppe Giuranno, 2009. "Regional Income Disparity and the Size of the Public Sector," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(5), pages 697-719, October.
    2. Horstmann, Ignatius J. & Scharf, Kimberley & Slivinski, Al, 2007. "Can private giving promote economic segregation?," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1095-1118, June.

    More about this item

    Keywords

    fiscal federalism; jurisdiction formation; private provision of public goods;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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