A Theory of Distributional Conflict, Voluntarism and Segregation

Ignatius J. Horstmann and Kimberley Scharf

Economic Journal, 2008, vol. 118, issue 527, 427-453

Abstract: Along with the rise in income inequality in the US, there is evidence of a simultaneous move towards fiscal devolution and increased government reliance on private provision of public goods. This article argues that these phenomena are related. We describe a model of jurisdiction and policy formation in which the structure of government provision is endogenous and public good provision levels are determined by a political process that can exploit private motives for voluntary giving. The model predicts that an increase in income inequality leads to decentralisation, with local jurisdictions becoming more income‐homogeneous than the population as a whole. This reduction in local income heterogeneity, combined with a reduced tax base, results in increased reliance by government on private provision.

Date: 2008
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https://doi.org/10.1111/j.1468-0297.2007.02128.x

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Journal Article: A Theory of Distributional Conflict, Voluntarism and Segregation (2008)
Working Paper: A Theory of Distributional Conflict, Voluntarism and Segregation (2002)
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