Economic Risk and Political Risk in Fiscal Unions.
A fiscal program that redistributes income from rich to poor individuals indirectly redistributes tax revenues from regions hit by a favorable shock to regions hit by an unfavorable one. Centralized fiscal redistribution has therefore been advocated as a way to insure individuals against region-specific shocks. In this paper, the authors argue that a centralized fiscal policy, while reducing the uncertainty on the tax base, may create additional uncertainty on the tax rate. Using a simple model they show that the higher uncertainty on the policy instrument might more than offset the lower uncertainty on the tax base.
Year of publication: |
1998
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Authors: | Alesina, Alberto ; Perotti, Roberto |
Published in: |
Economic Journal. - Royal Economic Society - RES, ISSN 1468-0297. - Vol. 108.1998, 449, p. 989-1008
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Publisher: |
Royal Economic Society - RES |
Saved in:
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