Vertical externalities with lump-sum taxes: how much difference does unemployment make?

Diego Martínez and Tomas Sjöngren
Additional contact information
Tomas Sjöngren: Umeå University

European Journal of Government and Economics, 2014, vol. 3, issue 1, 75-87

Abstract: This paper analyses how the existence of unemployment affects the conventional approach to vertical externalities. We discuss the optimality rule for the provision of public inputs both in a unitary and in a federal state. Our findings indicate that decentralising spending responsability on public inputs in the presence of unemployment allows output to be closer to the first best level. Moreover, we describe the inability of the federal government, behaving as a Stackelberg leader, to replicate the unitary outcome, unless there are new policy instruments at government's disposal.

Keywords: public inputs; unemployment; vertical externalities (search for similar items in EconPapers)
JEL-codes: H4 H7 J2 (search for similar items in EconPapers)
Date: 2014-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.ejge.org/index.php/ejge/article/download/54/45 (application/pdf)

Related works:
Working Paper: Vertical externalities with lump-sum taxes: how much difference does unemployment make? (2012)
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:egr:ejge00:v:3:i:1:p:75-87

Access Statistics for this article

European Journal of Government and Economics is currently edited by Jose Manuel Sanchez Santos

More articles in European Journal of Government and Economics from Europa Grande
Bibliographic data for series maintained by Europa Grande ( this e-mail address is bad, please contact ).