Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207094 
Year of Publication: 
2019
Series/Report no.: 
WWZ Working Paper No. 2019/03
Publisher: 
University of Basel, Center of Business and Economics (WWZ), Basel
Abstract: 
We analyze the strategic interaction of regional and federal governments using a model that includes fiscal externalities in the form of inter-regional capital tax competition and technical externalities in the form of inter-regional spillovers. The federal government aims to correct for these inefficiencies using a transfer system. If the regional governments are policy leaders (such that federal policy is set conditional on regional choices), they will internalize both fiscal and technical externalities but free-ride on the transfer system. Efficiency can be achieved by introducing a second transfer scheme that is independent of regional public production. If the federal government sets its policy first and can commit itself to it, the outcome is efficient only if matching grants are used that are financed outside of the transfer system.
Subjects: 
Fiscal federalism
tax competition
externalities
spillovers
commitment
centralized leadership
decentralized leadership
JEL: 
H21
H40
H77
Q58
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
627.67 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.