Tobin meets Oates: solidarity and the optimal fiscal federal structure

Xavier Calsamiglia (xavier.calsamiglia@upf.edu), Teresa Garcia-Mila and Therese McGuire (therese-mcguire@northwestern.edu)

International Tax and Public Finance, 2013, vol. 20, issue 3, 450-473

Abstract: We explore the implications for the optimal degree of fiscal decentralization when people’s preferences for goods and services—which classic treatments of fiscal federalism (Oates in Fiscal federalism, 1972 ) place in the purview of local governments—exhibit specific egalitarianism (Tobin in J. Law Econ. 13(2): 263–277, 1970 ), or solidarity. We find that a system in which the central government provides a common minimum level of the publicly provided good, and local governments are allowed to use their own resources to provide an even higher local level, performs better from an efficiency perspective relative to all other systems analyzed for a relevant range of preferences over solidarity. Copyright Springer Science+Business Media, LLC 2013

Keywords: Fiscal decentralization; Specific egalitarianism; Solidarity; Free riding; Externality; H42; H77 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Working Paper: Tobin Meets Oates: Solidarity and the Optimal Fiscal Federal Structure (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:20:y:2013:i:3:p:450-473

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DOI: 10.1007/s10797-012-9233-0

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