Interregional transfers, group loyalty and the decentralization of redistribution

Sabine Flamand ()

No 2010/37, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: We study the decentralization of redistributive taxation in a political economy model assuming regional heterogeneity regarding both group identity and average income. If a centralized system permits a beneficial pooling of national resources, it might also decrease the degree of solidarity in the society. With no group loyalty, centralization Pareto-dominates decentralization even when regions are not identical. Furthermore, increased heterogeneity need not increase the relative efficiency of decentralization. If regions are equally rich, centralization Pareto-dominates decentralization whenever group loyalty is not perfect. Finally, centralization is always more efficient than decentralization even when allowing for interregional transfers.

Keywords: Redistribution; fiscal federalism; group loyalty (search for similar items in EconPapers)
JEL-codes: D64 H23 H77 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2010
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Interregional transfers, group loyalty and the decentralization of redistribution (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ieb:wpaper:doc2010-37

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