Vertical externalities revisitednew results with public imputs and unit taxation

  1. Diego Martínez-López 1
  1. 1 Universidad Pablo de Olavide
    info

    Universidad Pablo de Olavide

    Sevilla, España

    ROR https://ror.org/02z749649

Revista:
Hacienda Pública Española / Review of Public Economics

ISSN: 0210-1173

Año de publicación: 2018

Número: 225

Páginas: 11-30

Tipo: Artículo

DOI: 10.7866/HPE-RPE.18.2.1 DIALNET GOOGLE SCHOLAR lock_openAcceso abierto editor

Otras publicaciones en: Hacienda Pública Española / Review of Public Economics

Resumen

This paper studies the provision of public inputs in a federal system. We use a model with vertical tax and expenditure externalities to analyze the efficiency of equilibria under different settings, particularly Nash and Stackelberg equilibria. Our results discuss some findings from the previous literature. First, both vertical externalities are interrelated each other. Second, the condition for production efficiency in the public sector becomes irrelevant to assess optimality. And third, the replication of the second-best outcome by the federal government with limited policy instruments crucially depends on the states’ reaction function.

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