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Endogenous Leadership in a Federal Transfer Game

Listed author(s):
  • Sengupta, Bodhisatva

    ()

    (IIT-Guwahati)

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    Conventional wisdom suggests that, to negate fiscal externalities imposed by provinces which spend too much and raise lower local resources, central authority should always be a first mover in the transfer game. In spite of such recommendations, central governments, in almost all countries, chooses to be the second mover from time to time. We explore the conditions, other than the familiar political economy arguments, under which the central government optimally chooses to be the second mover. Moreover, ex post transfer protocols may induce provinces to generate more local resources than otherwise. The results depend upon the benefit received by each level of government from the project outcomes of other tier.

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    File URL: http://www.nipfp.org.in/media/medialibrary/2016/11/WP_2016_180.pdf
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    Paper provided by National Institute of Public Finance and Policy in its series Working Papers with number 16/180.

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    Length: 32
    Date of creation: Nov 2016
    Handle: RePEc:npf:wpaper:16/180
    Note: Working Paper 180, 2016
    Contact details of provider: Web page: http://www.nipfp.org.in

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    3. Wildasin, David E., 1997. "Externalities and bailouts : hard and soft budget constraints in intergovernmental fiscal relations," Policy Research Working Paper Series 1843, The World Bank.
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    7. Koethenbuerger, Marko, 2008. "Federal tax-transfer policy and intergovernmental pre-commitment," Regional Science and Urban Economics, Elsevier, vol. 38(1), pages 16-31, January.
    8. B. Curtis Eaton, 2004. "The elementary economics of social dilemmas," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 805-829, November.
    9. Tracy Snoddon & Jean-François Wen, 2003. "Grants structure in an intergovernmental fiscal game," Economics of Governance, Springer, vol. 4(2), pages 115-126, August.
    10. Steve Dowrick, 1986. "von Stackelberg and Cournot Duopoly: Choosing Roles," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 251-260, Summer.
    11. Sengupta, Bodhisattva, 2011. "Provision of public goods in a federal economy: The role of party politics," European Journal of Political Economy, Elsevier, vol. 27(1), pages 104-119, March.
    12. Martin Besfamille & Ben Lockwood, 2008. "Bailouts In Federations: Is A Hard Budget Constraint Always Best?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 577-593, May.
    13. Kumawat, Lokendra & Bhanumurthy, N. R., 2016. "Regime Shifts in India's Monetary Policy Response Function," Working Papers 16/177, National Institute of Public Finance and Policy.
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