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Endogenous Leadership in a Federal Transfer Game

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  • Bodhisattva Sengupta

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Abstract

Conventional wisdom suggests that, to negate fiscal externalities imposed by provinces which spend too much and raise lower local resources, central authority should always be a first mover in the transfer game. In spite of such recommendations, central governments, in almost all countries, chooses to be the second mover from time to time. We explore the conditions, other than the familiar political economy arguments, under which the central government optimally chooses to be the second mover. Moreover, ex post transfer protocols may induce provinces to generate more local resources than otherwise. The results depend crucially upon the benefit received by each level of government from the project outcomes of other tier. [Working Paper No. 180].

Suggested Citation

  • Bodhisattva Sengupta, 2016. "Endogenous Leadership in a Federal Transfer Game," Working Papers id:11473, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:11473
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    References listed on IDEAS

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    Cited by:

    1. Tax Research Team, 2016. "Demonetisation: Impact on the Economy," Working Papers 16/182, National Institute of Public Finance and Policy.

    More about this item

    Keywords

    Federalism; Transfer Game; First and Second Mover Advantages; local resource; government project outcomes; benefit; political economy; central government; fiscal externalities; provinces; cost-benefit calculus; constitution; budget;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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