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Should the Power to Redistribute Income be (De-)Centralized? An Example

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  • Eckhard Janeba
  • Horst Raff

Abstract

This paper deals with two questions which have recentlyreceived considerable attention in both the political debateand the academic literature: First, are fiscal programs largeror smaller when they are (de-)centralized? Second, should suchprograms be (de-)centralized? We answer these questions withina politico-economic model in which voters choose the parametersof a linear income tax taking into account how taxes affect laborsupply and migration decisions. It is shown that a decentralizedpolitical system may lead to a smaller government budget. Theconcept of a veil of ignorance is used to analyze the desirabilityof a decentralized system. It is argued that a decentralizedsystem is preferred under the veil of ignorance only if individualsare not too risk-averse and the income distribution is not toopolarized. Copyright Kluwer Academic Publishers 1997

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  • Eckhard Janeba & Horst Raff, 1997. "Should the Power to Redistribute Income be (De-)Centralized? An Example," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(4), pages 453-461, November.
    • Handle: RePEc:kap:itaxpf:v:4:y:1997:i:4:p:453-461
    DOI: 10.1023/A:1008608914395
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    Cited by:

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    3. Kira Boerner & Silke Uebelmesser, 2007. "Migration and the welfare state: The economic power of the non-voter?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(1), pages 93-111, February.
    4. Hikaru Ogawa, 2001. "Allocation of authority under central grants," Economics of Governance, Springer, vol. 2(2), pages 159-172, July.
    5. Feld, Lars P, 2000. "Tax Competition and Income Redistribution: An Empirical Analysis for Switzerland," Public Choice, Springer, vol. 105(1-2), pages 125-164, October.

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