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Title:Fiscal equalization and yardstick competition PDF Logo
Authors:Kotsogiannis, Christos
Schwager, Robert
Issue Date:2006
Series/Report no.:CESifo working paper 1865
Abstract:A multi-jurisdictional system is thought to improve, through yardstick competition, accountability. At the same time equalization programs, a common feature of multijurisdictional systems, are thought to be a prerequisite for both efficiency of the internal market and the equity objective of the equal treatment of equals. This paper shows that such programs, by reducing the information context of comparisons across jurisdictions, introduce perverse fiscal incentives and thus reduce accountability. The consequence of this is that equilibrium rent-taking increases with the intensity of equalization transfers.
JEL:D72
H77
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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