When theory meets practice: can we implement the optimal fiscal federal structure?

Teresa Garcia-Mila and Therese J. McGuire

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

Abstract: We provide new insights into whether existing fiscal federal systems are achieving the best possible outcomes. Our new insights are based on the results of Calsamiglia, Garcia-Milà,and McGuire (2013). The authors introduce solidarity preferences into the standard model of fiscal federalism and find that a system with a common (countrywide) minimal level of spending combined with subnational revenue-raising authority dominates other typically considered systems. We use these results to develop a new lens through which to assess fiscal federal systems and we apply this new approach to the systems in Canada, Germany, Spain and the United States. With fairly straightforward reforms, existing fiscal federal systems could be improved, resulting in higher social welfare.

Keywords: fiscal federalism; fiscal decentralization; solidarity; revenue-raising authority (search for similar items in EconPapers)
Date: 2018-11, Revised 2019-07
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econ-papers.upf.edu/papers/1663.pdf Whole Paper (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

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:upf:upfgen:1663

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).