Delegation of Taxation Authority and Multipolicy Commitment in a Decentralized Leadership Model

Nobuo Akai and Takahiro Watanabe
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Nobuo Akai: Professor, Osaka School of International Public Policy, Osaka University
Takahiro Watanabe: PhD. Student, Graduate School of Economics, Osaka University

No 19E006, OSIPP Discussion Paper from Osaka School of International Public Policy, Osaka University

Abstract: This paper examines to what extent taxation authority should be delegated to local or lower-level government. Delegation of taxation authority can be regarded as a commitment to the local tax rate ex ante in a decentralized leadership model, in which local governments set policies ex ante and the central government decides transfer policies ex post. Previous papers point out that the ex post interregional transfers of the central government distort the ex ante regional policies of local governments. However, Silva (2014, 2015) clarify the case where efficient expenditure by local governments is achieved. This paper examines the delegation of taxation authority by extending Silva's model to include commitment to taxation and generally derives the conditions when efficient public expenditure by local governments can be achieved in relation to the delegation of taxation authority. The model adopted in this paper allows various levels of spillovers of local public goods and various types of multipolicy commitments of taxation and/or expenditure.

Keywords: Multipolicy; commitment.; Ex; post; interregional; transfers.; Spillover; effect (search for similar items in EconPapers)
JEL-codes: H41 H71 H72 H77 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2019-05
New Economics Papers: this item is included in nep-bec, nep-pbe and nep-pub
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