Districts’ co-financing of the central government

Johanna Jussila Hammes () and Svante Mandell
Additional contact information
Johanna Jussila Hammes : VTI, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden

No 2016:12, Working papers in Transport Economics from CTS - Centre for Transport Studies Stockholm (KTH and VTI)

Abstract: We study two districts’ voluntary co-financing of a centrally provided public good. Income taxes are collected both by the two local governments and by the central government. We compare outcomes with a surplus-maximizing level of public good provision. We show that co-financing per se does not influence the amount of public good provided. Co-financing and lobbying are substitutes, so that increased co-financing lowers the marginal amount of lobbying by a district. The production of the public good is closer to the surplus-maximizing level with co-financing and lobbying than with only lobbying. Including spillovers into the model, the provision of the public good can fall below the surplus-maximizing level if co-financing exceeds some threshold value. In order to understand the Swedish government’s claim that co-financing increases funds available for public good provision, we must assume that the central government’s ability to tax its citizens is limited. In this case, co-financing can raise the amount of the public good provided compared with pure central government provision.

Keywords: Budget constraint; Co-financing; Fiscal federalism; Lobbying; Political economy; Rent-seeking; Spillovers (search for similar items in EconPapers)
JEL-codes: H20 H40 H70 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2016-04-15
New Economics Papers: this item is included in nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.transportportal.se/swopec/CTS2016-12.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:ctswps:2016_012

Access Statistics for this paper

More papers in Working papers in Transport Economics from CTS - Centre for Transport Studies Stockholm (KTH and VTI) Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden.
Bibliographic data for series maintained by CTS ().