Interregional transfers, group loyalty and the decentralization of redistribution
We study the decentralization of redistributive taxation in a political economy model assuming regional heterogeneity regarding both group identity and average income. If a centralized system permits a beneficial pooling of national resources, it might also decrease the degree of solidarity in the society. With no group loyalty, centralization Pareto-dominates decentralization even when regions are not identical. Furthermore, increased heterogeneity need not increase the relative efficiency of decentralization. If regions are equally rich, centralization Pareto-dominates decentralization whenever group loyalty is not perfect. Finally, centralization is always more efficient than decentralization even when allowing for interregional transfers.
|Date of creation:||2010|
|Contact details of provider:|| Postal: Carrer del Tinent Coronel Valenzuela 1-11, 08034 Barcelona|
Phone: 93 403 46 46
Fax: 93 403 98 32
Web page: http://www.ieb.ub.edu
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ieb:wpaper:2010/9/doc2010-37. 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: ()
If references are entirely missing, you can add them using this form.