Vertical externalities in the provision of public inputs

Diego Martínez

No E2004/47, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: This paper studies the provision of public inputs in a federal system. A vertical tax externality is also considered. A simple general equilibrium model is used to analyze the efficiency of the equilibria under different scenarios. The results show that the state provision of public inputs may affect ambiguously federal tax revenues, depending on vertical tax externality, among others things. Moreover, it is proved that achieving a second best allocation is not straightforward for a federal government that plays a Stackelberg leader.

Keywords: Fiscal federalism; vertical externality; productive public spending. (search for similar items in EconPapers)
JEL-codes: H2 H4 H7 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2004
New Economics Papers: this item is included in nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:cea:doctra:e2004_47

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