How do local governments decide on public policy in fiscal federalism?: tax vs. expenditure optimization

Arbeitspapier

Previous literature widely assumes that taxes are optimized in local public finance while expenditures adjust residually. This paper endogenizes the choice of the optimization variable. In particular, it analyzes how federal policy toward local governments influences the way local governments decide on public policy. Unlike the presumption, the paper shows that local governments may choose to optimize over expenditures. The result most notably prevails when federal policy subsidizes local fiscal effort. The results offer a new perspective of the efficiency implications of federal policy toward local governments and, thereby, enable a more precise characterization of local government behaviour in fiscal federalism.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 2385

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: Tax vs expenditure optimization ; federalism ; endogenous commitment ; fiscal incentives ; policy interaction ; Kommunale Finanzpolitik ; Finanzföderalismus ; Finanzausgleich ; Ökonomischer Anreiz ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Köthenbürger, Marko
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2008

Weitere Informationen

• Handle: http://hdl.handle.net/10419/26430
• Letzte Aktualisierung: 10.03.2025, 11:47 MEZ