The Principle and Market Failure in Systems Competition
Contrary to a frequent contention, systems competition cannot work when governments respect the Subsidiarity Principle. The principle implies that governments step in where markets fail. Reintroducing markets through the back door of systems competition will again result in market failure. Three models are presented which illustrate this wisdom. The first is concerned with congestion-prone public goods and shows that fiscal competition may be ruinous for the governments. The second considers the insurance function of redistributive taxation and shows that systems competition may suffer from adverse selection. The third studies the role of quality regulation and shows that systems competition may be a competition of laxity resulting in inefficiently low quality standards.
|Date of creation:||Jan 1996|
|Date of revision:|
|Publication status:||published as C and S Working Paper, November 1995 Journal of Public Economics 66 (1997) 247-274 H Selection|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
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.:
- John G. Riley, 1976.
UCLA Economics Working Papers
071, UCLA Department of Economics.
- Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
- Bewley, Truman F, 1981. "A Critique of Tiebout's Theory of Local Public Expenditures," Econometrica, Econometric Society, vol. 49(3), pages 713-40, May.
- Milton Friedman, 1953. "Choice, Chance, and the Personal Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 61, pages 277.
- Sinn, Hans-Werner, 1994.
"How much Europe? Subsidiarity, centralization and fiscal competition,"
Munich Reprints in Economics
19838, University of Munich, Department of Economics.
- Sinn, Hans-Werner, 1994. "How Much Europe? Subsidiarity, Centralization and Fiscal Competition," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(1), pages 85-107, February.
- Sinn, Hans-Werner, 1993. "How Much Europe? Subsidiarity, Centralization and Fiscal Competition," CEPR Discussion Papers 834, C.E.P.R. Discussion Papers.
- Richard Arnott & Joseph Stiglitz, 1990.
"The Welfare Economics of Moral Hazard,"
NBER Working Papers
3316, National Bureau of Economic Research, Inc.
- Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
- Musgrave, Richard A, 1969. "Theories of Fiscal Federalism," Public Finance = Finances publiques, , vol. 24(4), pages 521-36.
- Boadway, Robin, 1980. "A note on the market provision of club goods," Journal of Public Economics, Elsevier, vol. 13(1), pages 131-137, February.
- Jeremy Edwards & Michael Keen, 1994.
"Tax competition and Leviathon,"
IFS Working Papers
W94/07, Institute for Fiscal Studies.
- John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61, pages 434.
- Oakland, William H., 1972. "Congestion, public goods and welfare," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 339-357, November.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- Spence, Michael & Zeckhauser, Richard, 1971. "Insurance, Information, and Individual Action," American Economic Review, American Economic Association, vol. 61(2), pages 380-87, May.
- Sandler, Todd & Tschirhart, John T, 1980. "The Economic Theory of Clubs: An Evaluative Survey," Journal of Economic Literature, American Economic Association, vol. 18(4), pages 1481-1521, December.
- Wilson, Charles A, 1979. "Equilibrium and Adverse Selection," American Economic Review, American Economic Association, vol. 69(2), pages 313-17, May.
- Mark V. Pauly, 1974. "Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection," The Quarterly Journal of Economics, Oxford University Press, vol. 88(1), pages 44-62.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5411. 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.