Intergenerational Fiscal Constitutions: How to Protect Future Generations Using Land Taxes and Federalism

John Conley and Antonio Rangel ()

No 8394, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies how to design a fiscal constitution that, by capitalizing intergenerational spillovers into land values, is able to protect future generations from expropriation and to generate optimal investment in intergenerational public goods. In particular, we study how to accomplish these goals by changing two dimensions of the fiscal constitution: (1) the level of government to which different types of intergenerational public goods are assigned, and (2) the tax base of the different jurisdictions. We show that the instruments required to generate capitalization of the intergenerational spillovers depend on the type of the spillover. Land taxation is the essential instrument for policies that mostly generate fiscal spillovers, such as debt and public infrastructure. By contrast, interjurisdictional competition is the essential instrument for policies that mostly generate direct spillovers, such as irreversible environmental damages. Furthermore, we show that it is possible to design a fiscal constitution that generates full capitalization of fiscal spillovers, but in general, not one that generates full capitalization of direct spillovers.

JEL-codes: D7 D9 (search for similar items in EconPapers)
Date: 2001-07
New Economics Papers: this item is included in nep-pub
Note: PE
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Citations: View citations in EconPapers (10)

Published as John Conley & Antonio Rangel, 2001. "Intergenerational Fiscal Constitutions: How to Protect Future Generations Using Land Taxes and Federalism," Economics Bulletin, AccessEcon, vol. 28(17), pages A0.

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