Fiscal federalism and interjurisdictional externalities: New results and an application to US Air pollution

Spencer Banzhaf and Benjamin Chupp

Journal of Public Economics, 2012, vol. 96, issue 5, 449-464

Abstract: The economics of fiscal federalism has identified two book-end departures from first-best provision of a public good. Local governments may respond to local conditions, but ignore inter-jurisdictional spillovers. Alternatively, central governments may internalize spillovers, but impose uniform incentives ignoring local heterogeneity. We provide a simple model that demonstrates that the choice of pricing policy also depends crucially on a third factor, the shape of marginal costs of providing the public good. If marginal costs are convex, then marginal abatement cost elasticities will be higher around the local policies. This increases the deadweight loss of those policies relative to the centralized policy, ceteris paribus. If they are concave, then the opposite is true.

Keywords: Fiscal federalism; Environmental federalism; Air pollution (search for similar items in EconPapers)
JEL-codes: H4 H7 Q5 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272712000023
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:96:y:2012:i:5:p:449-464

DOI: 10.1016/j.jpubeco.2012.01.001

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().