The Game of Negotiations: Ordering Issues and Implementing Agreements

Ignatius J. Horstmann and Kimberley A. Scharf
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Kimberley A. Scharf: The University of Warwick

No 200011, UWO Department of Economics Working Papers from University of Western Ontario, Department of Economics

Abstract: Along with the rise in income inequality in the U.S., we have observed a simultaneous move toward fiscal devolution and increased government reliance on private provision of public goods. This paper argues that these phenomena are related. We describe a model of jurisdiction and policy formation in which the structure of government provision is endogenous and public good provision levels are determined by a political process that can exploit private motives for voluntary giving. The model predicts that an increase in income inequality leads to decentralization, with local jurisdictions becoming more income-homogeneous than the population as a whole. This reduction in local income heterogeneity, combined with a reduced tax base, results in increased reliance by government on private provision.

Date: 2000-03

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Related works:
Working Paper: The Game of Negotiations: Ordering Issues and Implementing Agreements (2000)
Working Paper: The Game of Negotiations: Ordering Issues and Implementing Agreements (1997)
Working Paper: The Game of Negotiations: Ordering Issues and Implementing Agreements (2000)
Journal Article: The game of negotiations: ordering issues and implementing agreements (2002)
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