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The Tragedy of the Commons or the Curse of Federalism

  • Laurent Bouton

    (ECARES, Université Libre de Bruxelles)

  • Marjorie Gassner

    (ECARES, Université Libre de Bruxelles)

  • Vincenzo Verardi

    (ECARES, Université Libre de Bruxelles)

It has been suggested that …scal federalism is a good way to induce decentralized entities to behave parsimoniously, but this has been largely criticized in the literature, in particular because of the Common-Pool problem. In this paper, we present an extra facet of the latter problem. We present a simple theoretical model con…rmed by empirical evidence suggesting that vertical imbalance induces govenments to substitute redistributive spending for non-distributive expenditures. This drives …scal policies to be less efficient in reducing income inequality.

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File URL: http://econwpa.repec.org/eps/pe/papers/0511/0511013.pdf
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Paper provided by EconWPA in its series Public Economics with number 0511013.

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Length: 29 pages
Date of creation: 17 Nov 2005
Date of revision:
Handle: RePEc:wpa:wuwppe:0511013
Note: Type of Document - pdf; pages: 29
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Torsten Persson & Guido Tabellini, 1998. "The Size and Scope of Government: Comparative Politics with Rational Politicians," NBER Working Papers 6848, National Bureau of Economic Research, Inc.
  2. Angus Deaton & Christina Paxson, 1993. "Intertemporal Choice and Inequality," NBER Working Papers 4328, National Bureau of Economic Research, Inc.
  3. Wildasin, David E., 1998. "Fiscal aspect of evolving federations : issues for policy and research," Policy Research Working Paper Series 1884, The World Bank.
  4. Persson, Torsten & Tabellini, Guido, 1997. "Political Economics and Macroeconomic Policy," CEPR Discussion Papers 1759, C.E.P.R. Discussion Papers.
  5. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  6. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
  7. Hongyi Li & Lyn Squire & Heng-fu Zou, 1998. "Explaining International and Intertemporal Variations in Income Inequality," CEMA Working Papers 73, China Economics and Management Academy, Central University of Finance and Economics.
  8. Michael J. Keen & Christos Kotsogiannis, 2002. "Does Federalism Lead to Excessively High Taxes?," American Economic Review, American Economic Association, vol. 92(1), pages 363-370, March.
  9. Gian Maria Milesi-Ferretti & Roberto Perotti & Massimo Rostagno, 2002. "Electoral Systems and Public Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 609-657.
  10. Piketty, Thomas, 2000. "Theories of persistent inequality and intergenerational mobility," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 8, pages 429-476 Elsevier.
  11. Janos Kornai & Eric Maskin & Gerard Roland, 2002. "Understanding the Soft Budget Constraint," Economics Working Papers 0019, Institute for Advanced Study, School of Social Science.
  12. 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.
  13. Alan T. Peacock & Jack Wiseman, 1961. "The Growth of Public Expenditure in the United Kingdom," NBER Books, National Bureau of Economic Research, Inc, number peac61-1, March.
  14. Wildasin, David E., 1989. "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," Journal of Urban Economics, Elsevier, vol. 25(2), pages 193-212, March.
  15. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages F121-F149, February.
  16. Rodden, Jonathan, 2003. "Reviving Leviathan: Fiscal Federalism and the Growth of Government," International Organization, Cambridge University Press, vol. 57(04), pages 695-729, September.
  17. repec:idb:wpaper:4112 is not listed on IDEAS
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