Fiscal Equalization and Political Conflict
In this paper we analyze the political viability of equalization rules in the context of a decentralized country. We explore the idea that when equalization rules are perceived as unfair, regions may initiate a political conflict. Regions are formed by identical individuals who, through lobbying, try to obtain a higher share from the (equalization) pool of resources. Political conflict is measured as the total contribution to lobbying. We conclude that the onset of conflict depends on the degree of publicness of the regional budget and the relative size of the regions. When regional budgets are used to provide pure public goods, full fiscal equalization is politically feasible. However, fiscal equalization is not immune to conflict when budgets are used to provide private goods or a linear combination of private and public goods. The likelihood of political conflict decreases as the regions become similar in size.
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.:
- Desmet, Klaus & Le Breton, Michel & Ortuno-Ortin, Ignacio, 2006.
"Nation Formation and Genetic Diversity,"
IDEI Working Papers
133, Institut d'Économie Industrielle (IDEI), Toulouse.
- Desmet, Klaus & Le Breton, Michel & Ortuño-Ortín, Ignacio & Weber, Shlomo, 2006. "Nation Formation and Genetic Diversity," CEPR Discussion Papers 5918, C.E.P.R. Discussion Papers.
- DESMET, Klaus & LE BRETON, Michel & ORTUNO-ORTIN, Ignacio & WEBER, Shlomo, 2006. "Nation formation and genetic diversity," CORE Discussion Papers 2006095, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Mohtadi, Hamid & Roe, Terry, 1998. "Growth, lobbying and public goods," European Journal of Political Economy, Elsevier, vol. 14(3), pages 453-473, August.
- Michel Le Breton & Shlomo Weber, 2003. "The Art of Making Everybody Happy: How to Prevent a Secession," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 1-4.
- Michel Le Breton & Shlomo Weber, 2001. "The Art of Making Everybody Happy; How to Prevent a Secession," IMF Working Papers 01/176, International Monetary Fund.
- Le Breton, Michel & Weber, Shlomo, 2003. "The Art of Making Everybody Happy : How to Prevent a Secession," IDEI Working Papers 164, Institut d'Économie Industrielle (IDEI), Toulouse.
- LE BRETON, Michel & WEBER, Shlomo, 2001. "The art of making everybody happy: how to prevent a secession," CORE Discussion Papers 2001011, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Joan Esteban & Debraj Ray, 2001. "Social decision rules are not immune to conflict," Economics of Governance, Springer, vol. 2(1), pages 59-67, 03.
- Esteban, J. & Ray, D., 1999. "Social Decision Rules Are Not Immune to Conflict," Papers 22, El Instituto de Estudios Economicos de Galicia Pedro Barrie de la Maza.
- Joan Esteban & Debraj Ray, 2006. "Inequality, Lobbying, and Resource Allocation," American Economic Review, American Economic Association, vol. 96(1), pages 257-279, March.
- Esteban, Joan & Ray, Debraj, 1999. "Conflict and Distribution," Journal of Economic Theory, Elsevier, vol. 87(2), pages 379-415, August.
- Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
- Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290, February.
- Le Breton, Michel & Weber, Shlomo, 2003. "Secession-Proof Cost Allocations and Stable Group Structures in Models of Horizontal Differentiation," IDEI Working Papers 210, Institut d'Économie Industrielle (IDEI), Toulouse.
- Rama, Martin & Tabellim, Guido, 1998. "Lobbying by capital and labor over trade and labor market policies," European Economic Review, Elsevier, vol. 42(7), pages 1295-1316, July.
- Martín Rama & Guido Tabellini, "undated". "Lobbying by Capital and Labor over Trade and Labor Market Policies," Working Papers 94, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Moral Hazard," Econometrica, Econometric Society, vol. 64(3), pages 623-646, May.
- Matthew O. Jackson & Massimo Morelli, 2007. "Political Bias and War," American Economic Review, American Economic Association, vol. 97(4), pages 1353-1373, September.
- Jackson, Matthew O. & Morelli, Massimo, "undated". "Political bias and war," Working Papers 1247, California Institute of Technology, Division of the Humanities and Social Sciences.
- Robert Fenge & Jakob von Weizsäcker, 2001. "How Much Fiscal Equalization? A Constitutional Approach," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(4), pages 623-623, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ris:nepswp:2012_009. 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: (Vincenzo Bove)
If references are entirely missing, you can add them using this form.