Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70373
Authors: 
Horstmann, Ignatius J.
Scharf, Kimberley A.
Year of Publication: 
2000
Series/Report no.: 
Research Report, Department of Economics, University of Western Ontario 2000-11
Abstract: 
Along with the rise in income inequality in the U.S., we have observed a simultaneous move toward fiscal devolution and increased government reliance on private provision of public goods. This paper argues that these phenomena are related. We describe a model of jurisdiction and policy formation in which the structure of government provision is endogenous and public good provision levels are determined by a political process that can exploit private motives for voluntary giving. The model predicts that an increase in income inequality leads to decentralization, with local jurisdictions becoming more income-homogeneous than the population as a whole. This reduction in local income heterogeneity, combined with a reduced tax base, results in increased reliance by government on private provision.
Subjects: 
fiscal federalism
private provision of public goods
jurisdiction formation
JEL: 
H2
H7
Document Type: 
Working Paper

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