Sharing Budgetary Austerity under free Mobility and Asymmetric Information

Marie-Laure Breuillé () and Robert Gary-Bobo ()
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Robert Gary-Bobo: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique

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Abstract: In the present article, Tiebout meets Laffont and Tirole in the land of fiscal federalism. A non-trivial Principal–Multi-Agent model is used to characterize the optimal intergovernmental grant schedule, when the cost of local public goods depends on hidden characteristics and actions of local governments, and under citizen free mobility. We show how informational rents, landlords' interests, and citizen mobility interact to produce distortions at both ends of the type space: in particular the most efficient jurisdictions should overproduce and overtax in second-best optimum. Informational asymmetries decrease the average production of public goods and increase the inter-jurisdictional variance of taxes and public-good production.

Keywords: fiscal federalism; Tiebout equilibrium; optimal regulation; asymmetric information (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (19)

Published in Journal of Public Economics, 2007, 91 (5-6), pp.1177-1196. ⟨10.1016/j.jpubeco.2006.11.008⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00356048

DOI: 10.1016/j.jpubeco.2006.11.008

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