Interregional redistribution and budget institutions with private information on intergenerational externality

Darong Dai (), Liqun Liu () and Guoqiang Tian
Additional contact information
Liqun Liu: Texas A&M University

Review of Economic Design, 2019, vol. 23, issue 3, No 3, 127-154

Abstract: Abstract We study a federal government’s optimal redistributive policy across regions in the context of a model in which regions issue debt, invest in intergenerational public goods (IPGs), and have private information regarding the durability of their IPG investment. First, in both the complete-information and the asymmetric-information optimum, the region with a higher degree of intergenerational spillovers (H-region) should borrow more than the region with a lower degree (L-region). Second, to induce truth-telling under asymmetric information, the region not distorted on intertemporal allocation should be the contributor of redistribution. Third, the asymmetric-information optimum is implementable through decentralized regional debt decisions by imposing differentiated budget institutions: if H-region is distorted on intertemporal allocation, then it faces a debt floor; if L-region is distorted, then it faces a debt ceiling.

Keywords: Interregional redistribution; Regional debt; Borrowing rules; Asymmetric information; Intergenerational public goods (search for similar items in EconPapers)
JEL-codes: D82 H41 H74 H77 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10058-019-00225-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:reecde:v:23:y:2019:i:3:d:10.1007_s10058-019-00225-z

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/10058

DOI: 10.1007/s10058-019-00225-z

Access Statistics for this article

Review of Economic Design is currently edited by Atila Abdulkadiroglu, Fuhito Kojima and Tilman Börgers

More articles in Review of Economic Design from Springer, Society for Economic Design
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().