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Intergenerational Fiscal Constitutions: How to Protect Future Generations Using Land Taxes and Federalism

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  • John P. Conley
  • Antonio Rangel

Abstract

This paper studies how to design a fiscal constitution that, by capitalizing intergenerational spillovers into land values, is able to protect future generations from expropriation and to generate optimal investment in intergenerational public goods. In particular, we study how to accomplish these goals by changing two dimensions of the fiscal constitution: (1) the level of government to which different types of intergenerational public goods are assigned, and (2) the tax base of the different jurisdictions. We show that the instruments required to generate capitalization of the intergenerational spillovers depend on the type of the spillover. Land taxation is the essential instrument for policies that mostly generate fiscal spillovers, such as debt and public infrastructure. By contrast, interjurisdictional competition is the essential instrument for policies that mostly generate direct spillovers, such as irreversible environmental damages. Furthermore, we show that it is possible to design a fiscal constitution that generates full capitalization of fiscal spillovers, but in general, not one that generates full capitalization of direct spillovers.

Suggested Citation

  • John P. Conley & Antonio Rangel, 2001. "Intergenerational Fiscal Constitutions: How to Protect Future Generations Using Land Taxes and Federalism," NBER Working Papers 8394, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8394
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    References listed on IDEAS

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    1. Dennis Epple & Katherine Schipper, 1981. "Municipal pension funding: A theory and some evidence," Public Choice, Springer, vol. 37(1), pages 141-178, January.
    2. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1997. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1121-1166, December.
    3. Montes Alonso, Ana & Boldrin, Michele, 1998. "Intergenerational transfer institutions public education and public pensions," UC3M Working papers. Economics 6148, Universidad Carlos III de Madrid. Departamento de Economía.
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    Cited by:

    1. Hilber, Christian A.L., 2010. "New housing supply and the dilution of social capital," Journal of Urban Economics, Elsevier, vol. 67(3), pages 419-437, May.
    2. Marco Bassetto, 2008. "Public investment and budget rules for state vs. local governments," Working Paper Series WP-08-21, Federal Reserve Bank of Chicago.
    3. Marco Bassetto, 2009. "The Research Agenda: Marco Bassetto on the Quantitative Evaluation of Fiscal Policy Rules," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 10(2), April.
    4. Holger Sieg & Daniele Coen-Pirani & Jeffrey Brinkman, 2015. "The Political Economy of Underfunded Municipal Pension Plans," 2015 Meeting Papers 345, Society for Economic Dynamics.
    5. Paul R. Bergin & Reuven Glick, 2003. "Endogenous Tradability and Macroeconomic Implications," NBER Working Papers 9739, National Bureau of Economic Research, Inc.
    6. Hilber, Christian A.L. & Mayer, Christopher, 2009. "Why do households without children support local public schools? Linking house price capitalization to school spending," Journal of Urban Economics, Elsevier, vol. 65(1), pages 74-90, January.
    7. Reuven Glick & Paul Bergin, 2004. "Productivity and Tradability," 2004 Meeting Papers 327, Society for Economic Dynamics.
    8. Libman, Alexander, 2005. "Взаимодействие Государственных И Частных Структур В Интеграционных Группировах: Теоретические Подходы И Опыт Снг [Interaction of Public and Private Actors in Regional Integration Groups - Theoretic," MPRA Paper 17044, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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