Centralization Trade-off with Non-Uniform Taxes
When local public goods are provided by a centralized authority, spillovers may be coordinated, but heterogeneity in preferences may be suppressed. Besley and Coate (2003) have already solved this classic trade-off for a uniform tax regime. Here, we extend their approach by allowing for a non-uniform tax regime. We find that centralization with our tax system necessarily increases welfare in comparison to uniform-tax centralization. Importantly, with non-cooperative legislators coming from homogenous districts, our centralization dominates decentralization for any degree of spillovers. In other cases, it at least improves odds of centralization, if measured by utilitarian yardstick.
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- Timothy Besley & Stephen Coate, 1999.
"Centralized versus Decentralized Provision of Local Public Goods: A Political Economy Analysis,"
NBER Working Papers
7084, National Bureau of Economic Research, Inc.
- Besley, Timothy J. & Coate, Stephen, 2000. "Centralized versus Decentralized Provision of Local Public Goods: a Political Economy Analysis," CEPR Discussion Papers 2495, C.E.P.R. Discussion Papers.
- repec:cup:cbooks:9780521738057 is not listed on IDEAS
- Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
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- Redoano, Michela & Scharf, Kimberly A., 2004.
"The political economy of policy centralization: direct versus representative democracy,"
Journal of Public Economics,
Elsevier, vol. 88(3-4), pages 799-817, March.
- Michela Redoano & Kimberley Ann Scharf, 2001. "The Political Economy of Policy Centralization: Direct Versus Representative Democracy," CESifo Working Paper Series 602, CESifo Group Munich.
- Redoano, Michela & Scharf, Kimberley, 2002. "The Political Economy of Policy Centralization: Direct Versus Representative Democracy," CEPR Discussion Papers 3631, C.E.P.R. Discussion Papers.
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