Fiscal Federalism Revisited

Charles Blackorby () and Craig Brett ()

UBC Departmental Archives from UBC Department of Economics

Abstract: We analyze how constitutional restrictions on tax bases within a federation affect the nature of Pareto-improving directions of tax reform and the design of optimal federal taxes. We show that constraints on federal taxation entail production inefficiency at the optimum, except under very restrictive circumstances. In passing, we show that using consumer prices as a control variables-a standard procedure in tax-reform analysis-rather than the taxes themselves, leads to incorrect conclusions when not all taxes or prices can be controlled.

Keywords: FISCAL POLICY; FEDERALISM (search for similar items in EconPapers)
JEL-codes: D61 H21 H70 (search for similar items in EconPapers)
Date: 1998

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Journal Article: Fiscal Federalism Revisited (2000)
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Persistent link: http://EconPapers.repec.org/RePEc:ubc:bricol:98-09

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