The main goal of this paper is to estimate to what extent the federal government of the United States insures member states against regional income shocks. We find that a one dollar reduction in a region's per capita personal income triggers a decrease in federal taxes of about 34 cents and an...

We study cross-country risk sharing as a second-best problem for members of a currency union using an open economy model with nominal rigidities and provide two key results. First, we show that if financial markets are incomplete, the value of gaining access to any given level of aggregate risk...

We apply ideas from fiscal federalism to reassess how fiscal authority should be delegated within a monetary union. In a real-economy model with no fiscal externalities, in which local fiscal authorities have an informational advantage about the preferences of their citizens for public spending...

Inefficiencies from tax competition may result in governments seeking to limit fiscal competition via tax treaties, harmonization, minimum tax rates, or interjurisdictional cooperation. I propose a general model applicable to studying many types of taxing instruments, which allows for the...

This paper rethinks the design of the income tax by assuming that the objective of the tax is not to redistribute from rich to poor but instead to provide some insurance to individuals against the uncertainties they face in their future earnings, a motivation for the tax proposed in Buchanan...

This paper studies how to design a fiscal constitution that, by capitalizing intergenerational spillovers into land values, is able to protect future generations from expropriation and to generate optimal investment in intergenerational public goods. In particular, we study how to accomplish...

Control of public spending and revenues is increasingly being left to states and localities. In order to understand the consequences of such a movement on the distribution of social spending, it is necessary to understand how fiscal distress will affect state and local budgets. This paper...

Given the temptation on government officials to use some of their budget for 'perks,' residents face the problem of inducing officials to reduce such 'waste.' The threat to vote out of office officials who perform poorly is one possible response. In this paper, we explore the effect that...

This paper presents new evidence on the effect of state fiscal institutions, particularly balanced-budget rules and restrictions on state debt issuance, on the yields on state general obligation bonds. We analyze information from the Chubb Relative Value Survey, which contains relative...

This paper provides a critical survey of the literature on politico-institutional determinants of the government budget. We organize our discussion around two questions: Why did certain OECD countries, but not others, accumulate large public debts? Why did these fiscal imbalances appear in the...