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Tobin meets Oates: Solidarity and the optimal fiscal federal structure

Xavier Calsamiglia, Teresa Garcia-Mila and Therese J. McGuire

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We explore the implications for the optimal degree of fiscal decentralization when people’s preferences for goods and services, which classic treatments of fiscal federalism (Oates, 1972) place in the purview of local governments, exhibit specific egalitarianism (Tobin, 1970), or solidarity. We find that a system in which the central government provides a common minimum level of the publicly provided good, and local governments are allowed to use their own resources to provide an even higher local level, performs better from an efficiency perspective relative to all other systems analyzed for a relevant range of preferences over solidarity.

Keywords: fiscal decentralization; specific egalitarianism; solidarity; externalities. (search for similar items in EconPapers)
JEL-codes: H42 H77 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe and nep-ure
Date: 2010-07
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Related works:
Journal Article: Tobin meets Oates: solidarity and the optimal fiscal federal structure (2013) Downloads
Working Paper: Tobin Meets Oates: Solidarity and the Optimal Fiscal Federal Structure (2010) Downloads
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