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Funding source and soft budget constraint

Author

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  • Marie-Laure Breuillé
  • Thierry Madiès
  • Emmanuelle Taugourdeau

Abstract

This paper analyses the impact of funding source of the bailout on the softness of the regional budget constraint. We show that the funding source of the bailout has a considerable impact both on the credibility of the federal government's commitment and on the regional opportunistic behaviour. By choosing the adequate tax tool, the federal government turns out to be able to limit the soft budget constraint phenomenon.

Suggested Citation

  • Marie-Laure Breuillé & Thierry Madiès & Emmanuelle Taugourdeau, 2007. "Funding source and soft budget constraint," EconomiX Working Papers 2007-12, University of Paris Nanterre, EconomiX.
  • Handle: RePEc:drm:wpaper:2007-12
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    File URL: http://economix.fr/pdf/dt/2007/WP_EcoX_2007-12.pdf
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    References listed on IDEAS

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    1. Pettersson-Lidbom, Per & Dahlberg, Matz, 2003. "An Empirical Approach for Evaluating Soft Budget Constraints," Working Paper Series 2003:28, Uppsala University, Department of Economics.
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    Cited by:

    1. Plachta, Robert C., 2008. "Fiscal Equalisation and the Soft Budget Constraint," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 08-8, University of Cologne, FiFo Institute for Public Economics.

    More about this item

    Keywords

    Tax Competition; Soft Budget Constraint; Fiscal Federalism;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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