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Marché de droits au déficit et contrainte budgétaire molle

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  • Marie-Laure Breuillé

Abstract

This article evaluates the efficiency of a market for tradable deficit permits as a mechanism for implementing budgetary austerity at the local level, when the initial allocation of deficit rights can be manipulated. The way déficit rights are allocated in the market turns out to be decisive for the cost-effectiveness of the System. Indeed, the inability of the State to commit dynamically to an initial allocation of deficit rights generates perverse incentives which affect the efficiency of the local market for tradable deficit permits. It is shown that the decentralized behaviour of local jurisdictions does not lead to the least-cost solution attainable under joint-cost minimization, due to the soft budget constraint problem. Classification JEL : E61 ; E62 ; G14 ; H6 ; H7

Suggested Citation

  • Marie-Laure Breuillé, 2008. "Marché de droits au déficit et contrainte budgétaire molle," Revue économique, Presses de Sciences-Po, vol. 59(3), pages 571-582.
    • Handle: RePEc:cai:recosp:reco_593_0571
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    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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