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Efficient earmarking under decentralized fiscal commitments

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Abstract

Earmarked federal grants are ubiquitous and significant. Traditional fiscal federalism is unable to explain these grants’ widespread utilization. Recent arguments focusing on the potential benefits of centralized earmarking in reducing incentives for the creation of soft budgets at subcentral government levels merit formalization. I show that universal earmarking improves the efficiency of a federation in which regional governments are able to commit to provision of all regional public goods. However, efficient earmarking need not be universal: It should only involve private consumption and fiscal budgets for public goods subject to decentralized fiscal commitments. Copyright Springer Science+Business Media New York 2015

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  • Emilson Silva, 2015. "Efficient earmarking under decentralized fiscal commitments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(4), pages 683-701, August.
    • Handle: RePEc:kap:itaxpf:v:22:y:2015:i:4:p:683-701
    DOI: 10.1007/s10797-015-9365-0
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    References listed on IDEAS

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    19. Silva, Emilson Caputo Delfino, 2014. "Selective decentralized leadership," Journal of Urban Economics, Elsevier, vol. 83(C), pages 1-5.
    20. Caplan, Arthur J. & Cornes, Richard C. & Silva, Emilson C. D., 2000. "Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility," Journal of Public Economics, Elsevier, vol. 77(2), pages 265-284, August.
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    Cited by:

    1. Plaček Michal & Ochrana František & Půček Milan & Křápek Milan, 2017. "Does Decentralized Leadership Influence the Performance of Czech Museums?," NISPAcee Journal of Public Administration and Policy, Sciendo, vol. 10(1), pages 121-139, June.
    2. Bodhisattva Sengupta, 2016. "Endogenous Leadership in a Federal Transfer Game," Working Papers id:11473, eSocialSciences.
    3. Thierry Madiès & Emmanuelle Taugourdeau, 2017. "Decentralized leadership in a federation and competition for mobile firms: Does economic integration matter?," Working Papers 2017-73, Center for Research in Economics and Statistics.
    4. Toshiki Tamai & Gareth Myles, 2022. "Unemployment, tax competition, and tax transfer policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(3), pages 470-503, June.
    5. Riemer P. Faber & Pierre Koning, 2017. "Why not fully spend a conditional block grant?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 60-95, February.
    6. Thierry Madiès & Emmanuelle Taugourdeau, 2020. "Vertical transfers and tax competition: does trade integration matter?," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 55(3), pages 453-475, October.
    7. Emilson C.D. Silva, 2016. "Decentralized Leadership," CESifo Working Paper Series 6064, CESifo.
    8. Thierry MADIÈS & Emmanuelle TAUGOURDEAU, 2019. "Decentralized leadership in a federation with competition for mobile firms: Does economic integration matter?," Working Papers 2019-24, Center for Research in Economics and Statistics.
    9. Thierry MADIÈS & Emmanuelle TAUGOURDEAU, 2019. "Decentralized leadership in a federation with competition for mobile firms: Does economic integration matter?," Working Papers 2019-24, Center for Research in Economics and Statistics.
    10. Sengupta, Bodhisatva, 2016. "Endogenous Leadership in a Federal Transfer Game," Working Papers 16/180, National Institute of Public Finance and Policy.
    11. Emilson Caputo Delfino Silva, 2017. "Tax competition and federal equalization schemes with decentralized leadership," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 164-178, February.
    12. Nobuo Akai & Takahiro Watanabe, 2023. "Electoral outcomes and local public goods provision with ex post interregional transfer," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(6), pages 1633-1655, December.
    13. Naoto Aoyama & Emilson Caputo Delfino Silva, 2023. "Efficient Decentralized Leadership under Hybrid Work and Attachment to Regions," Games, MDPI, vol. 14(2), pages 1-18, March.

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    More about this item

    Keywords

    Earmarked grants; Decentralized fiscal commitments; Soft budgets; Selective decentralized leadership; C72; D62; H41; H77; R5;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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