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Would less solidarity justify present calls for devolution?

Listed author(s):
  • Rosella Levaggi

    ()

    (Università di Brescia)

  • Francesco Menoncin

    ()

    (Università di Brescia)

In this study, we argue that the rules set by a central government to allocate interregional equalization grants may induce richer regions to ask for devolution, even when centralized provision is more efficient. We model a local public good with spillovers in a framework in which devolution is socially inefficient. Nevertheless, we show that the de- centralized solution may be preferred by the richer regions if it implies a reduction in solidarity. We define a threshold for regional income disparity above which claims for more devolution may be driven by a reduction in solidarity. Finally, the relative strength of this effect is computed for a sample of countries.

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Paper provided by Società Italiana di Economia Pubblica in its series Working papers with number 32.

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Date of creation: Oct 2015
Handle: RePEc:ipu:wpaper:32
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Società Italiana di Economia Pubblica Corso Strada Nuova 65 27100 Pavia Italia

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  1. Tanzi, Vito, 2008. "The future of fiscal federalism," Discussion Papers, Research Unit: Market Processes and Governance SP II 2008-03, Social Science Research Center Berlin (WZB).
  2. Jason Sorens, 2014. "Does Fiscal Federalism Promote Regional Inequality? An Empirical Analysis of the OECD, 1980-2005," Regional Studies, Taylor & Francis Journals, vol. 48(2), pages 239-253, February.
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  4. Hansjörg Blöchliger & Claire Charbit, 2008. "Fiscal equalisation," OECD Journal: Economic Studies, OECD Publishing, vol. 2008(1), pages 1-22.
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  9. Tanzi, Vito, 2009. "The future of fiscal federalism and the need for global government: A reply to Roland Vaubel," European Journal of Political Economy, Elsevier, vol. 25(1), pages 137-139, March.
  10. Vaubel, Roland, 2009. "The future of fiscal federalism and the need for global government: A response to Vito Tanzi," European Journal of Political Economy, Elsevier, vol. 25(1), pages 133-136, March.
  11. Agnese Sacchi & Simone Salotti, 2014. "How regional inequality affects fiscal decentralisation: accounting for the autonomy of subcentral governments," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 32(1), pages 144-162, February.
  12. Hillman,Arye L., 2009. "Public Finance and Public Policy," Cambridge Books, Cambridge University Press, number 9780521738057, September.
  13. Tanzi, Vito, 2008. "The future of fiscal federalism," European Journal of Political Economy, Elsevier, vol. 24(3), pages 705-712, September.
  14. Ferrario, Caterina & Zanardi, Alberto, 2011. "Fiscal decentralization in the Italian NHS: What happens to interregional redistribution?," Health Policy, Elsevier, vol. 100(1), pages 71-80, April.
  15. 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.
  16. Tresch, Richard W. & Tresch, Richard W., 2002. "Public Finance," Elsevier Monographs, Elsevier, edition 2, number 9780126990515.
  17. Weingast, Barry R., 2009. "Second generation fiscal federalism: The implications of fiscal incentives," Journal of Urban Economics, Elsevier, vol. 65(3), pages 279-293, May.
  18. Michael Smart, 1998. "Taxation and Deadweight Loss in a System of Intergovernmental Transfers," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 189-206, February.
  19. Oates, Wallace E., 2008. "On the Evolution of Fiscal Federalism: Theory and Institutions," National Tax Journal, National Tax Association, vol. 61(2), pages 313-334, June.
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