IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Redistribution and Provision of Public Goods in an Economic Federation

  • Aronsson, Thomas


    (Department of Economics)

  • Blomquist, Sören


    (Department of Economics)

This paper concerns redistribution and provision of public goods in an economic federation with two levels of government: a local government in each locality and a central government for the economic federation as a whole. We assume that each locality is characterized by two ability-types (high and low), and that their distribution differs between localities. The set of policy instruments facing the central government consists of a nonlinear income tax and a lump-sum transfer to each local government, while the local governments use proportional income taxes and the transfers from the central government to finance the provision of local public goods. The purpose is to characterize the tax and expenditure structure in a decentralized setting, where the central and local governments have distinct roles to play, and also compare this tax and expenditure structure with the second best resource allocation. We show how the redistributive role of taxation is combined with a corrective role, since tax base sharing among the central and local governments gives rise to a vertical fiscal external effect. In addition, the central government does not in general implement the second best resource allocation with the instruments at its disposal.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Katarina Grönvall)

Download Restriction: no

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2004:4.

in new window

Length: 23 pages
Date of creation: 20 Mar 2004
Date of revision:
Handle: RePEc:hhs:uunewp:2004_004
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page:

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.:

as in new window
  1. Boadway, Robin & Marchand, Maurice & Vigneault, Marianne, 1998. "The consequences of overlapping tax bases for redistribution and public spending in a federation," Journal of Public Economics, Elsevier, vol. 68(3), pages 453-478, June.
  2. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
  3. Thomas Aronsson & S�Ren Blomquist, 2008. "Redistribution and Provision of Public Goods in an Economic Federation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(1), pages 125-143, 02.
  4. Blomquist, Sören & Micheletto, Luca, 2003. "Age Related Optimal Income Taxation," Working Paper Series 2003:7, Uppsala University, Department of Economics.
  5. Marceau, Nicolas & Boadway, Robin, 1994. " Minimum Wage Legislation and Unemployment Insurance as Instruments for Redistribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(1), pages 67-81.
  6. Johnson, William R, 1988. "Income Redistribution in a Federal System," American Economic Review, American Economic Association, vol. 78(3), pages 570-73, June.
  7. Hanna Ågren & Matz Dahlberg & Eva Mörk, 2007. "Do politicians’ preferences correspond to those of the voters? An investigation of political representation," Public Choice, Springer, vol. 130(1), pages 137-162, January.
  8. Gottfries, Nils, 2003. "Booms and Busts in EMU," Working Paper Series 2003:29, Uppsala University, Department of Economics.
  9. Peter Fredriksson & Bertil Holmlund, 2003. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," CESifo Working Paper Series 922, CESifo Group Munich.
  10. Dahlberg, Susanne & Nahum, Ruth-Aïda, 2003. "Cohort Effects on Earnings Profiles: Evidence from Sweden," Arbetsrapport 2003:3, Institute for Futures Studies.
  11. Fredriksson, Peter & Holmlund, Bertil, 2005. "Optimal unemployment insurance design: time limits, monitoring, or workfare?," Working Paper Series 2005:13, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  12. Hallberg, Daniel, 2003. "A Description of Routes out of the Labor Force for Workers in Sweden," Working Paper Series 2003:23, Uppsala University, Department of Economics.
  13. Bergman, Mats A. & Jakobsson, Maria & Razo, Carlos, 2003. "An Econometric Analysis of the European Commission's Merger Decisions," Working Paper Series 2003:6, Uppsala University, Department of Economics.
  14. Lindvall, Lars, 2003. "Does Public Spending on Youths Affect Crime Rates?," Working Paper Series 2004:3, Uppsala University, Department of Economics.
  15. Häkkinen, Iida & Uusitalo, Roope, 2003. "The Effect of a Student Aid Reform on Graduation: A Duration Analysis," Working Paper Series 2003:8, Uppsala University, Department of Economics.
  16. Boadway, R & Keen, M, 1996. "Efficiency and the optimal direction of federal-state transfers," IFS Working Papers W96/01, Institute for Fiscal Studies.
  17. Engström, Per, 2003. "Unemployment Benefits and Optimal Non-Linear Income Taxation," Working Paper Series 2003:3, Uppsala University, Department of Economics.
  18. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  19. N. Anders Klevmarken, 2003. "On Household Wealth Trends in Sweden over the 1990s," Economics Working Paper Archive wp_395, Levy Economics Institute.
  20. Edmark, Karin, 2003. "The Effects of Unemployment on Property Crime: Evidence from a Period of Unusually Large Swings in the Business Cycle," Working Paper Series 2003:14, Uppsala University, Department of Economics.
  21. Fredriksson, Peter & Johansson, Per, 2003. "Employment, Mobility, and Active Labor Market Programs," Working Paper Series 2003:5, Uppsala University, Department of Economics.
  22. Bergman, Mats, 2003. "When Should an Incumbent Be Obliged to Share its Infrastructure with an Entrant Under the General Competition Rules?," Working Paper Series 2003:25, Uppsala University, Department of Economics.
  23. Eklöf, Matias, 2003. "Assessing Social Costs of Inefficient Procurement Design," Working Paper Series 2003:12, Uppsala University, Department of Economics.
  24. Lindhe, Tobias & Södersten, Jan & Öberg, Ann, 2003. "Economic Effects of Taxing Different Organizational Forms under a Dual Income Tax," Working Paper Series 2003:19, Uppsala University, Department of Economics.
  25. Holmlund, Bertil, 2003. "The Rise and Fall of Swedish Unemployment," Working Paper Series 2003:13, Uppsala University, Department of Economics.
  26. Thomas Aronsson & Magnus Wikström, 2001. "Optimal Taxes and Transfers in a Multilevel Public Sector," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(2), pages 158-, February.
  27. Pettersson-Lidbom, Per & Dahlberg, Matz, 2003. "An Empirical Approach for Evaluating Soft Budget Constraints," Working Paper Series 2003:28, Uppsala University, Department of Economics.
  28. Hedström, Peter & Kolm, Ann-Sofie & Åberg, Yvonne, 2003. "Social Interactions and Unemployment," Working Paper Series 2003:18, Uppsala University, Department of Economics.
  29. Taslimi, Mohammad, 2003. "Optimal Earnings-Related Unemployment Benefits," Working Paper Series 2003:16, Uppsala University, Department of Economics.
  30. Hakkinen, Iida, 2006. "Working while enrolled in a university: does it pay?," Labour Economics, Elsevier, vol. 13(2), pages 167-189, April.
  31. Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
  32. Thomas Aronsson & Magnus Wikstrom, 2003. "Optimal taxation and risk-sharing arrangements in an economic federation," Oxford Economic Papers, Oxford University Press, vol. 55(1), pages 104-120, January.
  33. Hansson, Ingemar & Stuart, Charles, 1987. "The suboptimality of local taxation under two-tier fiscal federalism," European Journal of Political Economy, Elsevier, vol. 3(3), pages 407-411.
  34. 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.
  35. Savvidou, Eleni, 2003. "The Relationship Between Skilled Labor and Technical Change," Working Paper Series 2003:27, Uppsala University, Department of Economics.
  36. Dahlberg, Matz & Eklöf, Matias, 2003. "Relaxing the IIA Assumption in Locational Choice Models: A Comparison Between Conditional Logit, Mixed Logit, and Multinomial Probit Models," Working Paper Series 2003:9, Uppsala University, Department of Economics.
  37. Bev Dahlby, 1996. "Fiscal externalities and the design of intergovernmental grants," International Tax and Public Finance, Springer, vol. 3(3), pages 397-412, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hhs:uunewp:2004_004. 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: (Katarina Grönvall)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.