Fiscal federalism and soft budget constraint: does the nature of public spending matter?

Marie-Laure Breuillé (), Thierry Madiès () and Emmanuelle Taugourdeau
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Marie-Laure Breuillé: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper analyses the impact of both the nature of regional public spending and the federal government's fiscal tools on the softness of the regional budget constraint and the regional provision of public good. We show that i) whatever the nature of regional public spending, the regional budget constraint is harder when the federal government can no longer manipulate its lump sum tax and ii) under the assumption that the federal government can no longer manipulate its lump sum tax, the federal bailout is lower when the region provides a public input rather than a public good but the regional budget constraint can be either softer or harder.

Keywords: Soft Budget Constraint; Fiscal Federalism; Tax Competition; Public Input (search for similar items in EconPapers)
Date: 2007
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Working Paper: Fiscal federalism and soft budget constraint: does the nature of public spending matter? (2007)
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