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Centralized vs. Decentralized Redistribution: A Case for Interregional Transfer Mechanisms

Andreas Pfingsten and Andreas Wagener

International Tax and Public Finance, 1997, vol. 4, issue 4, 429-451

Abstract: According to conventional wisdom, Musgrave's “RedistributionBranch” should be assigned to the central level of governmentin a federation. Otherwise, fiscal externalities created by themobility of the poor would render decentralized redistributioninefficient, if not impossible. The paper objects to this viewand argues that decentralized intraregional redistribution canyield efficient outcomes if it is combined with cleverly designedinterregional transfer mechanisms. Within a general frameworkwe give necessary and sufficient conditions for interregionaltransfer schemes to implement efficient allocations as Nash equilibriaof a decentralized redistribution game. Copyright Kluwer Academic Publishers 1997

Keywords: Decentralization; Redistribution; Fiscal Federalism; Public Funds Sharing (search for similar items in EconPapers)
Date: 1997
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DOI: 10.1023/A:1008656830324

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