Sub-national fiscal policy under cooperative and non-cooperative models

Ligia Alba Melo-Becerra ()
Authors registered in the RePEc Author Service: Ligia Melo ()

Revista Cuadernos de Economia, 2016, vol. 35, issue Especial 67, 253-279

Abstract: This article presents a comparative analysis of the optimal fiscal response to shocks in the sub-national public sector in cooperative and non-cooperative models. The analysis is undertaken by comparing models that assume idiosyncratic demandside shocks and sub-national autonomy to collect taxes, with models that assume that the central government collects the taxes of the whole country and redistributes them across regions. Results show that under symmetrical conditions, the non-cooperative solution may result in greater stabilization and lower sub-national public expenditure than the cooperative solution. However, if regional asymmetries are introduced into the model, results may be reversed. ***** En este artículo se realiza un análisis comparativo de la respuesta fiscal óptima a choques en el sector público subnacional entre modelos cooperativos y no cooperativos. El análisis compara modelos que asumen choques de demanda idiosincrásicos y autonomía subnacional para recaudar impuestos, con modelos que asumen que el gobierno central recauda los impuestos y distribuye los ingresos entre las regiones. Los resultados de los modelos indican que en condiciones de simetría, la solución no cooperativa puede resultar en una mayor estabilización y en un menor gasto público subnacional en comparación con la solución cooperativa. Sin embargo, cuando se introducen asimetrías regionales en el modelo, los resultados se pueden invertir.

Keywords: Fiscal decentralization; non-cooperative models; cooperative models; sub-national governments (search for similar items in EconPapers)
JEL-codes: H7 H72 H77 (search for similar items in EconPapers)
Date: 2016
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