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

Any de publicació: 2018

Número: 225

Pàgines: 11-30

Tipus: Article

DOI: 10.7866/HPE-RPE.18.2.1 DIALNET GOOGLE SCHOLAR lock_openAccés obert editor

Altres publicacions en: Hacienda Pública Española / Review of Public Economics

Resum

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.

Referències bibliogràfiques

  • Anderson, L., Aronsson, T. and Wikstrom, M. (2004), "Testing for ver-tical fiscal externalities", International Tax and Public Finance, 11(3): 243-263
  • Atkinson, A. B. and Stern, N. H. (1974), "Pigou, taxation and public goods", Review of Economic Studies, 41: 119-128
  • Bénassy-Quéré, A., Gobalraja, N. and Trannoy, A. (2007), "Tax and public input competition", Economic Policy, 22(50): 386-430
  • Besley, T. J and Rosen, H. S. (1998), "Vertical externalities in tax setting: evidence from gasoline and cigarettes", Journal of Public Economics, 70: 383-398
  • Blackorby, C. and Brett, C. (2000), "Fiscal federalism revisited", Journal of Economic Theory, 92: 300-317
  • Becker, S. O., Egger, P. H., and Von Ehrlich, M. (2010), "Going NUTS: The effect of EU Structural Funds on regional performance", Journal of Public Economics, 94(9): 578-590
  • Boadway, R., Marchand, M. and Vigneault, M. (1998), "The consequences of overlaping tax bases for redistribution and public spending in a federation", Journal of Public Economics, 68: 453-478
  • Boadway, R. and Keen, M. (1996), "Efficiency and the optimal direction of federal-state transfer", International Tax and Public Finance, 3: 137-155
  • Bucovetsky, S. (2005), "Public input competition", Journal of Public Economics, 89(9): 1763-1787
  • Dahlby, B. (1996), "Fiscal externalities and the design of intergovernmental grants", International Tax and Public Finance, 3: 397-412
  • Dahlby, B. and Wilson, L. S. (1994), "Fiscal capacity, tax effort, and optimal equalization grants", Canadian Journal of Economics, 27: 657-652
  • Dahlby, B. and Wilson, L. S. (2003), "Vertical fiscal externalities in a federation", Journal of Public Economics, 87: 917-930
  • De la Fuente, A., Thone, M. and Kastrop, C. (2016), "Regional Financing in Germany and Spain: Comparative Reform Perspectives", Policy Papers 2016 05, FEDEA
  • Esteller-More, A and Sole-Olle, A. (2001), "Vertical income tax externalities and fiscal interdependence: evidence from the US", Regional Science and Urban Economics, 31(2): 247-272
  • Feehan, J. P. and Matsumoto, M. (2002), "Distortionary taxation and optimal public spending on productive activities", Economic Inquiry, 40(1): 60-68
  • Fenge, R., Ehrlich, M. and Wrede, M. (2009), "Public input competition and agglomeration", Regional Science and Urban Economics, 39(5): 621-631
  • Flowers, M. R. (1988), "Shared tax sources in a Leviathan model of federalism", Public Finance Quaterly, 16: 397-412
  • Goodspeed, T. J. (2002), "Bailouts in a Federation", International Tax and Public Finance, 9(4): 409-421
  • Johnson, W. R. (1988), "Income redistribution in a federal system", American Economic Review, 78: 570-573
  • Keen, M. (1998), "Vertical tax externalities in the theory of fiscal federalism", IMF Staff Papers, 45(3): 454-485
  • Keen, M. and Kotsogiannis, C. (2002), "Does federalism lead to excessively high taxes?", American Economic Review, 92(1): 363-370
  • Kotsogiannis, C. and Makris, M. (2002), "On production efficiency in federal systems", Economics Letters, 76: 281-287
  • Kotsogiannis, C. and Martínez, D. (2008), "Ad valorem taxes and the fiscal gap in federations", Economics Letters, 99(3): 431-434
  • Liu, Y. and Martínez-Vázquez, J. (2015), "Public input competition under Stackelberg equilibrium: A note", Journal of Public Economic Theory, 17(6): 1022-1037
  • Lucas, V. (2004), "Cross-border shopping in a federal country", Regional Science and Urban Economics, 34(4): 365-385
  • Madies, T. (2004), "Interjurisdictional tax competition and vertical externalities when states provide industrial public goods: A note", 60th Conference of International Institute of Public Finance, Milan, August 2004
  • Mansoorian, A. and Myers, G. M. (1995), "On the consequences of government objectives for economies with mobile populations", Working Paper No 95-2, York University
  • Martínez, D. (2008), "Optimal federal taxes with public inputs", FinanzArchiv/Public Finance Analysis, 64: 422-433
  • Martínez, D. and Sánchez, A. J. (2010), "A note on the optimal level of public inputs", Social Choice and Welfare, 34(3): 363-369
  • Martínez, D. and Sjongren, T. (2014), "Vertical externalities with lumpsum taxes: how much difference does unemployment make?", European Journal of Government and Economics, 3(1): 75-87
  • OECD (2014), "Recommendation of the Council on Effective Public Investment Across Levels of Government", 12 March 2014
  • Sato, M. (2000), "Fiscal externalities and efficient transfers in a federation", International Tax and Public Finance, 7(2): 119-139
  • Smart, M. (1998), "Taxation and deadweight loss in a system of intergovernmental transfers", Canadian Journal of Economics, 31: 189-206
  • Wildasin, D. (1986), Urban Public Finance, Chur, Switzerland: Harwood Academic
  • Wrede, M. (2000), "Shared tax sources and public expenditures", International Tax and Public Finance, 7: 163-175
Fuente de los datos: Dialnet