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This paper revisits the soft budget constraint problem arising in decentralised countries. Capturing the specific dynamics of political decision making in a federation, new light is shed on the incentives at work when lower-level (state) governments overborrow and are bailed out by the federal...
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Looking at the Belgian federation, where 10% of the working population commutes across the borders of three small regions, a case can be made for studying commuting flows in a federal constellation. In this paper, commuting is introduced to a federal setting where an ad valorem residence based...
Persistent link: https://www.econbiz.de/10011546986
In this paper, we model a federal economy where perfectly mobile labour supply is taxed on an ad valorem basis by the federal as well as lower-level (state) governments. We find that either under- or overtaxation occurs, under similar conditions as in Keen and Kotsogiannis (2002, 2004). However,...
Persistent link: https://www.econbiz.de/10013011358
This paper revisits the soft budget constraint problem, pushing sub-central (state) borrowing to the limit in multi-tiered countries. Accounting for the institutional design and political practice common to many federations, bargaining and log-rolling are introduced to the analysis. In our...
Persistent link: https://www.econbiz.de/10013058229
Devolving tax authority to lower-level jurisdictions in a federation is often argued to better align the actions of politicians with the wishes of voters. In this paper, we derive the conditions for tax autonomy to bring about local growth-enhancing policies - as the fiscal incentives approach...
Persistent link: https://www.econbiz.de/10012994476
In this paper, commuting is introduced to a federal setting where an ad valorem residence based tax on labour income is decentralised. Under full decentralisation, this has lower-level (state) governments set inefficiently low taxes, even when households as a whole do not migrate. The motive of...
Persistent link: https://www.econbiz.de/10013044206