Should the Power to Redistribute Income be (De-)Centralized? An Example

Eckhard Janeba and Horst Raff

International Tax and Public Finance, 1997, vol. 4, issue 4, 453-461

Abstract: This paper deals with two questions which have recentlyreceived considerable attention in both the political debateand the academic literature: First, are fiscal programs largeror smaller when they are (de-)centralized? Second, should suchprograms be (de-)centralized? We answer these questions withina politico-economic model in which voters choose the parametersof a linear income tax taking into account how taxes affect laborsupply and migration decisions. It is shown that a decentralizedpolitical system may lead to a smaller government budget. Theconcept of a veil of ignorance is used to analyze the desirabilityof a decentralized system. It is argued that a decentralizedsystem is preferred under the veil of ignorance only if individualsare not too risk-averse and the income distribution is not toopolarized. Copyright Kluwer Academic Publishers 1997

Keywords: Income Redistribution; Mobility; Majority Voting; Fiscal Federalism (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (9)

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DOI: 10.1023/A:1008608914395

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