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A Theory of Distributional Conflict, Voluntarism and Segregation

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  • Ignatius J. Horstmann
  • Kimberley A. Scharf

Abstract

Along with the rise in income inequality in the US, there is evidence of a simultaneous move towards fiscal devolution and increased government reliance on private provision of public goods. This article argues that these phenomena are related. We describe a model of jurisdiction and policy formation in which the structure of government provision is endogenous and public good provision levels are determined by a political process that can exploit private motives for voluntary giving. The model predicts that an increase in income inequality leads to decentralisation, with local jurisdictions becoming more income‐homogeneous than the population as a whole. This reduction in local income heterogeneity, combined with a reduced tax base, results in increased reliance by government on private provision.

Suggested Citation

  • Ignatius J. Horstmann & Kimberley A. Scharf, 2008. "A Theory of Distributional Conflict, Voluntarism and Segregation," Economic Journal, Royal Economic Society, vol. 118(527), pages 427-453, March.
  • Handle: RePEc:wly:econjl:v:118:y:2008:i:527:p:427-453
    DOI: 10.1111/j.1468-0297.2007.02128.x
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    Cited by:

    1. Giovanniello, Monica A. & Perroni, Carlo & Scharf, Kimberley & Slivinski, Al, 2019. "Non-discriminatory donation relief and strategic commitment under political competition," European Journal of Political Economy, Elsevier, vol. 58(C), pages 164-177.
    2. Horstmann, Ignatius J. & Scharf, Kimberley & Slivinski, Al, 2007. "Can private giving promote economic segregation?," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1095-1118, June.
    3. Almunia, Miguel & Guceri, Irem & Lockwood, Ben & Scharf, Kimberley, 2020. "More giving or more givers? The effects of tax incentives on charitable donations in the UK," Journal of Public Economics, Elsevier, vol. 183(C).
    4. Michele Giuseppe Giuranno, 2009. "Regional Income Disparity and the Size of the Public Sector," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(5), pages 697-719, October.
    5. Andrew Pickering & Sheraz Rajput, 2018. "Inequality and the composition of taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(4), pages 1001-1028, August.

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    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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