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Taxation, social protection, and governance decentralization

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  • Epstein, Gil S.
  • Gang, Ira N.

Abstract

Governments do not have perfect information regarding constituent priorities and needs. This lack of knowledge opens the door for groups to lobby in order to affect the government’s taxation levels. We examine the political economy of decentralized revenue-raising authority in light of social protection expenditures by constructing a theoretical model of hierarchical contests and comparing the implications of centralized with decentralized governance. Increasing information available to the government may generate additional expenditures by interest groups trying to affect government taxation decisions. We show the potential existence of a poverty trap as a result of decentralization in taxation decisions.

Suggested Citation

  • Epstein, Gil S. & Gang, Ira N., 2017. "Taxation, social protection, and governance decentralization," GLO Discussion Paper Series 143, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:143
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    More about this item

    Keywords

    governance; decentralization; economic-models-of-political-processes; contests; rentseeking; intergovernmental-relations;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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