Overlapping soft budget constraints

Marie-Laure Breuillé () and Marianne Vigneault
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Marie-Laure Breuillé: CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux - INRA - Institut National de la Recherche Agronomique - AgroSup Dijon - Institut National Supérieur des Sciences Agronomiques, de l'Alimentation et de l'Environnement
Marianne Vigneault: UdeS - Université de Sherbrooke

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Abstract: Our paper identifies a potential problem with decentralization at a time when its virtues are widely extolled. We show that responsibility for equalization at multi-levels within a decentralized federation creates an overlapping equalization policy that can worsen fiscal discipline. Contrary to Qian and Roland (1998), we also show in our set-up that fiscal competition among regional rescuers does not act as a commitment device to harden the local budget constraint.

Keywords: fiscal federalism; capital tax competition; soft budget constraint; decentralisation (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (28)

Published in Journal of Urban Economics, 2010, 67 (3), pp.259-269. ⟨10.1016/j.jue.2009.09.011⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02659645

DOI: 10.1016/j.jue.2009.09.011

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