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Devolution, Grants, and Fiscal Competition

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  • Richard A. Musgrave

Abstract

Following half a century of fiscal activism and federal leadership, the call now is for downsizing the federal budget and a devolution of fiscal responsibilities to states and localities. The call for "federalism," meant to secure a stronger center in James Madison's time, now seeks to decentralize. This paper outlines the main features of fiscal federalism as I see them, sketching a vision which differs in major respects from that offered by the lead paper in this symposium. First I highlight the role of distribution, which I see as a central function. Then, I focus attention on grants-in-aid and their role in the federal system. Finally I consider competition, cooperation, and coordination between jurisdictions.

Suggested Citation

  • Richard A. Musgrave, 1997. "Devolution, Grants, and Fiscal Competition," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 65-72, Fall.
    • Handle: RePEc:aea:jecper:v:11:y:1997:i:4:p:65-72
    Note: DOI: 10.1257/jep.11.4.65
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.11.4.65
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    References listed on IDEAS

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    1. Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February.
    2. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-633, November.
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    Cited by:

    1. David R. Agrawal, 2024. "Limits to Competition: Strategies for Promoting Jurisdictional Cooperation," NBER Chapters, in: Policy Responses to Tax Competition, National Bureau of Economic Research, Inc.
    2. Sato, Motohiro, 2003. "Tax competition, rent-seeking and fiscal decentralization," European Economic Review, Elsevier, vol. 47(1), pages 19-40, February.
    3. Stotsky, Janet G. & Chakraborty, Lekha & Gandhi, Piyush, 2018. "Impact of Intergovernmental Fiscal Transfers on Gender Equality in India: An Empirical Analysis," Working Papers 18/240, National Institute of Public Finance and Policy.
    4. Henry Tulkens, 2007. "Le fédéralisme, la démocratie et la Belgique," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(1), pages 65-73.
    5. Albouy, David, 2012. "Evaluating the efficiency and equity of federal fiscal equalization," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 824-839.
    6. repec:hal:spmain:info:hdl:2441/10059 is not listed on IDEAS
    7. repec:spo:wpecon:info:hdl:2441/10059 is not listed on IDEAS
    8. Swenson, David & Deller, Steven C., 2001. "Devolution or Convolution? The Changing Relationship Between Federal, State and Local Governments," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 31(1), pages 1-27.
    9. repec:spo:wpmain:info:hdl:2441/10059 is not listed on IDEAS
    10. Irina N. Ilina & Carol S. Leonard & Evgenij E. Plisetskij, 2014. "Russian Regional Resilience: Finance, Cooperation And Resource Abundance (A Case Study Of Khanty-Mansiysk)," HSE Working papers WP BRP 15/PA/2014, National Research University Higher School of Economics.
    11. Seppo Honkapohja & Frank Westermann, 2009. "Rethinking Subsidiarity in the EU: Economic Principles," Palgrave Macmillan Books, in: Seppo Honkapohja & Frank Westermann (ed.), Designing the European Model, chapter 10, pages 331-365, Palgrave Macmillan.
    12. Rocabado Mejía, Carlos, 2006. "La Asignación Tributaria en Bolivia," Documentos de trabajo 7/2006, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana.
    13. repec:lic:licosd:10701 is not listed on IDEAS
    14. Henry Tulkens, 2002. "On Cooperation in Musgravian Models of Externalities within a Federation," CESifo Working Paper Series 701, CESifo.
    15. repec:hal:wpspec:info:hdl:2441/10059 is not listed on IDEAS
    16. Baskaran, Thushyanthan & Lopes da Fonseca, Mariana, 2021. "Appointed public officials and local favoritism: Evidence from the German states," Journal of Urban Economics, Elsevier, vol. 124(C).
    17. Muhammad Sabir, 2010. "Financial Implications of the 7th NFC Award and the Impact on Social Services," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 387-403.
    18. Benjamin A. Olken & Junko Onishi & Susan Wong, 2014. "Should Aid Reward Performance? Evidence from a Field Experiment on Health and Education in Indonesia," American Economic Journal: Applied Economics, American Economic Association, vol. 6(4), pages 1-34, October.
    19. Olga Lucía Acosta N. & Israel Fainboim & Catalina Gutiérrez S. & Blanca Cecilia Zuluaga D., 1999. "Relaciones fiscales entre el Distrito Especial de Bogotá y la Nación," Coyuntura Social 13094, Fedesarrollo.
    20. Tanja A. Boerzel & Madeleine O. Hosli, 2002. "Comparative Federalism meets the European Union," The Constitutionalism Web-Papers p0007, University of Hamburg, Faculty for Economics and Social Sciences, Department of Social Sciences, Institute of Political Science.
    21. Jurgen von Hagen, 2016. "Fiscal Federalism: Public Goods, Transfers, and Common Pools," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 10(2), pages 41-75, December.
    22. Iain Begg & Henrik Enderlein & Jacques Le Cacheux & Mojmir Mrak, 2008. "Financing of the European Union Budget," Working Papers hal-03459814, HAL.
    23. Khalida Ghaus & Muhammad Sabir, 2014. "Intergovernmental Fiscal Transfers and Gender Sensitive Education Financing," Southern Voice Occasional Paper 13, Southern Voice.

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    More about this item

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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