Arbeitspapier

Fiscal federalism, taxation and grants

We propose a theory of tax centralization and inter governmental grants in politico-economic equilibrium. The cost of taxation differs across levels of government because voters internalize general equilibrium effects at the central but not at the local level. This renders the degree of tax centralization and the tax burden determinate even if none of the traditional, expenditure-related motives for centralization considered in the fiscal federalism literature is present. If central and local spending are complements and the trade-off between the cost of taxation and the benefit of spending is perceived differently across levels of government, inter governmental grants become relevant. Calibrated to U.S. data, our model helps to explain the introduction of federal grants at the time of the New Deal, and their increase up to the turn of the twenty-first century. Grants are predicted to increase to approximately 5.5% of GDP by 2060.

Sprache
Englisch

Erschienen in
Series: Working Paper ; No. 16.05

Klassifikation
Wirtschaft
Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
Fiscal Policy
Public Goods
Intergovernmental Relations; Federalism; Secession
Thema
Fiscal policy
Federalism
Politico-economic equilibrium
Markov equilibrium
Public goods
Grants
Political Economy

Ereignis
Geistige Schöpfung
(wer)
Gonzalez-Eiras, Martín
Niepelt, Dirk
Ereignis
Veröffentlichung
(wer)
Swiss National Bank, Study Center Gerzensee
(wo)
Gerzensee
(wann)
2016

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Gonzalez-Eiras, Martín
  • Niepelt, Dirk
  • Swiss National Bank, Study Center Gerzensee

Entstanden

  • 2016

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