Gross versus net equalization scheme in a federation with decentralized leadership

Breuillé, Marie-Laure; Madiès, Thierry; Taugourdeau, Emmanuelle

doi:10.1016/j.jue.2010.04.002

Cited by 16 publications

(10 citation statements)

References 32 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…However, for any other preferences, the public good is either under-or over-provided. 20 This is qualitatively consistent with Breuille et al (2010), who find that a net transfer system performs better than a gross transfer system.…”

Section: Proposition 3 Decentralized Equilibrium With Gross Transfersupporting

confidence: 72%

“…A number of previous papers have addressed the efficiency of decentralized public provision in the context of strictly local public goods (Koethenbuerger, 2004;Breuille et al, 2010;Silva, 2016). Caplan et al (2000) investigate the special case of a public good that is associated with perfect spillovers (which makes it a "global" public good) and prove that under decentralized leadership and a net transfer scheme, the outcome can be efficient.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Decentralization with porous borders: public production in a federation with tax competition and spillovers

Armbruster

Hintermann

2019

Int Tax Public Finance

View full text Add to dashboard Cite

We analyze the strategic interaction of regional and federal governments using a model that includes fiscal externalities in the form of interregional capital tax competition and technical externalities in the form of interregional spillovers. The federal government aims to correct for these inefficiencies using a transfer system. If the regional governments are policy leaders (such that federal policy is set conditional on regional choices), they will internalize both fiscal and technical externalities but free-ride on the transfer system. Efficiency can be achieved by introducing a second transfer scheme that is independent of regional public production. If the federal government sets its policy first and can commit itself to it, the outcome is efficient only if matching grants are used that are financed outside of the transfer system.

show abstract

Section: Proposition 3 Decentralized Equilibrium With Gross Transfersupporting

confidence: 72%

Section: Introductionmentioning

confidence: 99%

Decentralization with porous borders: public production in a federation with tax competition and spillovers

Armbruster

Hintermann

2019

Int Tax Public Finance

View full text Add to dashboard Cite

show abstract

“…Assuming homogeneity among all the competing regions, Hauptmeier (2009) and Breuillé et al (2010) investigate the effects of equalization transfers on the mix of local spending and conclude that the systematic bias of public spending toward an over-provision of public input-as pointed out in Keen and Marchand (1997)-is indeed alleviated via an equalization transfers system. However, their framework does not allow them to explore how equalization transfers may affect the asymmetric choice of expenditure policies across heterogeneous regions, which is the main focus of this paper.…”

Section: Review Of the Related Literaturementioning

confidence: 99%

Does competition for capital discipline governments? The role of fiscal equalization

Liu

2013

Int Tax Public Finance

View full text Add to dashboard Cite

“…If local governments expect that the central government will bail them out ex post with extra grants, a moral hazard problem occurs, and local governments are likely to overspend (e.g., Goodspeed, 2002). This soft budget constraint literature is closely related to the literature on decentralized leadership (e.g., Köthenbürger, 2004;Akai and Sato, 2008;Breuillé et al, 2010). In these studies, local jurisdictions make their taxing and spending decisions ex ante, and the central government decides on grant allocation ex post.…”

Section: Related Literaturementioning

confidence: 98%

Welfare Financing: Grant Allocation and Efficiency

Toolsema

Allers

2014

De Economist

View full text Add to dashboard Cite

Welfare is often administered locally, but financed through grants from the central government. This raises the question how the central government can prevent local governments from spending more than necessary. Block grants are more efficient than matching grants, because the latter reduce the local governments' incentive to limit welfare spending. However, conventional block grant financing is less equitable, indeed, it may put a heavy burden on local governments in economically weak regions. This paper considers block grants which depend on exogenous spending need determinants, and are estimated from previous period welfare spending. This allocation method gives rise to perverse incentives by reducing the marginal costs of welfare spending. We derive the conditions for such a grant to be more efficient than a matching grant, and apply our results to the Netherlands, where such a grant exists since 2004. We conclude that the Dutch style grant is likely to be more efficient than a matching grant. As it is also more equitable, other countries might want to consider introducing a similar grant.

show abstract

Gross versus net equalization scheme in a federation with decentralized leadership

Cited by 16 publications

References 32 publications

Decentralization with porous borders: public production in a federation with tax competition and spillovers

Decentralization with porous borders: public production in a federation with tax competition and spillovers

Does competition for capital discipline governments? The role of fiscal equalization

Welfare Financing: Grant Allocation and Efficiency

Contact Info

Product

Resources

About