Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171552
Authors: 
Gersbach, Hans
Hahn, Volker
Imhof, Stephan
Year of Publication: 
2009
Series/Report no.: 
Economics Working Paper Series 09/109
Abstract: 
We examine the provision of public projects under separate tax and subsidy rules. We find that tax rules separated from project cum subsidy decisions exhibit several advantages when incentive problems of the agenda-setter are taken into account. In particular, tax rules may prevent the proposal of inefficient projects which benefit only a small lobby group. We propose “redistribution efficiency” as a socially desirable property of proposals and find that tax rules always guarantee redistribution efficiency. We show that rules on subsidies combined with discretion regarding taxes always yield socially inferior proposals. Finally, tax rules induce the agenda-setter to look for potential improvements of public projects.
Subjects: 
constitutional design
provision of public projects
voting
taxes and subsidies
JEL: 
D72
H40
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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