The Tragedy of the Commons or the Curse of Federalism

Laurent Bouton (), Marjorie Gassner and Vincenzo Verardi

Public Economics from EconWPA

Abstract: It has been suggested that …scal federalism is a good way to induce decentralized entities to behave parsimoniously, but this has been largely criticized in the literature, in particular because of the Common-Pool problem. In this paper, we present an extra facet of the latter problem. We present a simple theoretical model con…rmed by empirical evidence suggesting that vertical imbalance induces govenments to substitute redistributive spending for non-distributive expenditures. This drives …scal policies to be less efficient in reducing income inequality.

Keywords: Federalism; Income Inequality; Common Pool; Redistribution (search for similar items in EconPapers)
JEL-codes: D6 D7 H (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2005-11-17
Note: Type of Document - pdf; pages: 29
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwppe:0511013

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