Tenets of Fiscal Federalism and Decentralization

Shyam Nath () and Yeti Nisha Madhoo
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Shyam Nath: Amrita Vishwa Vidyapeetham University
Yeti Nisha Madhoo: Amrita Vishwa Vidyapeetham University

Chapter Chapter 3 in Vanishing Borders of Urban Local Finance, 2022, pp 49-65 from Springer

Abstract: Abstract The cornerstones of jurisdictional formation and fiscal decentralization are heterogeneous preferences for local public goods and services and minimal interjurisdictional spillovers. First and second-generation fiscal federalism theories present an account of how fiscal decentralization stands strong even when decentralized provision is possible under centralized decisions. It is also demonstrated that in very small countries with homogeneous preferences and absolute absence of interjurisdictional spillover, citizen-voters may still prefer local provision as against central provision. An attempt is made to present an alternative model of local fiscal decisions in an assembly of elected representatives using a game theoretic behavior on their part. The basic condition of equilibrium is equalization of relative marginal concessions in the presence of potential threat of coalition on the part of other legislators. This formulation is in sharp contrast to the equilibrium achieved in the Tiebout model through migration and voting by the feet.

Keywords: First-generation fiscal federalism; second-generation fiscal federalism; fiscal decentralization, Tiebout model, Game theory (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-19-5300-2_3

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DOI: 10.1007/978-981-19-5300-2_3

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