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Fiscal equalization and lobbying

Author

Listed:
  • Alejandro Esteller-Moré

    (Universitat de Barcelona
    Institut d’Economia de Barcelona (IEB))

  • Umberto Galmarini

    (Institut d’Economia de Barcelona (IEB)
    Università dell’Insubria)

  • Leonzio Rizzo

    (Institut d’Economia de Barcelona (IEB)
    Università di Ferrara)

Abstract

Inter-regional redistribution through tax-base equalization transfers is examined in a setting in which taxpayers, organized as lobby groups, influence policy making. With lobbying only at the local level on tax rates, social welfare maximization implies, ceteris paribus, high (low) equalization rates on the tax bases backed by the strong (weak) lobby groups. With lobbying also at the central level, equalization is distorted downward on all tax bases if the pressure groups are similar in terms of lobbying power. It is instead distorted downward (upward) on the bases backed by strong (weak) groups if they are highly heterogeneous. In the latter situation, a uniform equalization structure may perform better than a differentiated one.

Suggested Citation

  • Alejandro Esteller-Moré & Umberto Galmarini & Leonzio Rizzo, 2017. "Fiscal equalization and lobbying," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(2), pages 221-247, April.
    • Handle: RePEc:kap:itaxpf:v:24:y:2017:i:2:d:10.1007_s10797-016-9415-2
    DOI: 10.1007/s10797-016-9415-2
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    Cited by:

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    3. Willem Sas, 2017. "Can fiscal equalisation mitigate tax competition? Ad valorem and residence-based taxation in a federation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 817-853, September.
    4. Mutsumi Matsumoto, 2022. "Tax competition and tax base equalization in the presence of multiple tax instruments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(5), pages 1213-1226, October.

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    More about this item

    Keywords

    Fiscal-capacity equalization transfers; Special interest groups; Inter-regional redistribution; Equity-efficiency trade-off; Uniform versus differentiated equalization;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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