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Fiscal Competition, Decentralization, Leviathan, and Growth

Author

Listed:
  • Ken Tabata

    (Kwansei Gakuin University)

Abstract

This paper studies the implications of different fiscal regimes (i.e. centralized vs decentralized) for economic growth and welfare by incorporating Wilson (2005)-type fiscal competition model into a Barro (1990)-type endogenous growth model. We show that fiscal decentralization is more desirable than fiscal centralization for economic growth, when the degree of selfishness of central government bureaucrats is high, and the relative political power of the young to the old is low. We also show that the growth-maximizing fiscal regime is also welfare-maximizing.

Suggested Citation

  • Ken Tabata, 2009. "Fiscal Competition, Decentralization, Leviathan, and Growth," Discussion Paper Series 49, School of Economics, Kwansei Gakuin University, revised Nov 2009.
  • Handle: RePEc:kgu:wpaper:49
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    File URL: http://192.218.163.163/RePEc/pdf/kgdp49.pdf
    File Function: First version, 2009
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    More about this item

    Keywords

    Fiscal competition; Decentralization; Leviathan; Overlapping generations;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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