IDEAS home Printed from https://ideas.repec.org/a/mhr/finarc/sici0015-2218(200903)651_122etfdae_2.0.tx_2-q.html
   My bibliography  Save this article

Equalization Transfers, Fiscal Decentralization, and Economic Growth

Author

Listed:
  • Hikaru Ogawa
  • Sayaka Yakita

Abstract

This paper analyzes the fiscal decentralization and equalization transfers in a two-region model of endogenous growth. In our model, two levels of government with different objectives are considered: the local governments maximize the utility of the residents of the region, and the central government makes the equalization transfers to close the gaps in fiscal capacity among the regions and pays attention to the economic growth rate. Our first result demonstrates that the preferred tax rate chosen by the local government is positively affected by the magnitude of fiscal decentralization. The second result shows that the fiscal equalization policies of the central government have no influence on the speed of interregional growth convergence. Furthermore, the normative implication is obtained from our final results that there exists an optimal degree of fiscal decentralization to reach the central government´s goal of growth maximization, but the magnitude of fiscal decentralization chosen by the central government is excessive to entail the highest regional welfare.

Suggested Citation

  • Hikaru Ogawa & Sayaka Yakita, 2009. "Equalization Transfers, Fiscal Decentralization, and Economic Growth," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(1), pages 122-140, March.
    • Handle: RePEc:mhr:finarc:sici:0015-2218(200903)65:1_122:etfdae_2.0.tx_2-q
    DOI: 10.1628/001522108X444198
    as

    Download full text from publisher

    File URL: https://www.mohrsiebeck.com/en/article/equalization-transfers-fiscal-decentralization-and-economic-growth-101628001522109x444198
    Download Restriction: Fulltext access is included for subscribers to the printed version.
    File URL: https://libkey.io/10.1628/001522108X444198?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gerking, Shelby & Stanley, Linda R, 1986. "An Economic Analysis of Air Pollution and Health: The Case of St. Louis," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 115-121, February.
    2. Bovenberg, A.L. & Goulder, L.H., 1996. "Optimal environmental taxation in the presence of other taxes : General equilibrium analyses," Other publications TiSEM 5d4b7517-c5c8-4ef6-ab76-3, Tilburg University, School of Economics and Management.
    3. Pio Baake & Rainald Borck & Andreas L–ffler, 2004. "Complexity and Progressivity in Income Tax Design: Deductions for Work-Related Expenses," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(3), pages 299-312, May.
    4. Bovenberg, A Lans & Goulder, Lawrence H, 1996. "Optimal Environmental Taxation in the Presence of Other Taxes: General-Equilibrium Analyses," American Economic Review, American Economic Association, vol. 86(4), pages 985-1000, September.
    5. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-1089, September.
    6. A. Bovenberg, 1999. "Green Tax Reforms and the Double Dividend: an Updated Reader's Guide," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 421-443, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Till Gross, 2021. "Dynamic Optimal Fiscal Policy in a Transfer Union," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 194-238, October.
    2. Chan, Felix & Petchey, Jeff, 2017. "A note on the relation between fiscal equalization and economic growth," MPRA Paper 79156, University Library of Munich, Germany.
    3. Pierre Salmon, 2013. "Decentralization and growth: what if the cross-jurisdiction approach had met a dead end?," Constitutional Political Economy, Springer, vol. 24(2), pages 87-107, June.
    4. Sayaka Yakita, 2011. "Fiscal decentralization, migration and economic growth," Regional Science Policy & Practice, Wiley Blackwell, vol. 3(4), pages 381-399, November.
    5. Chang, Yuan & Wu, Peng, 2024. "Influence of fiscal decentralization, fintech, and mineral resources on green productivity of G5 countries," Resources Policy, Elsevier, vol. 89(C).
    6. Henry Aray & Luis Pedagua, 2021. "Decentralization and economic growth: Evidence across states of some relevant macroeconomic variables," ThE Papers 21/08, Department of Economic Theory and Economic History of the University of Granada..
    7. Juan S. Mora‐Sanguinetti & Rok Spruk, 2023. "Economic effects of recent experiences of federalism: Analysis of the regionalization process in Spain," Journal of Regional Science, Wiley Blackwell, vol. 63(1), pages 30-63, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Glomm, Gerhard & Kawaguchi, Daiji & Sepulveda, Facundo, 2008. "Green taxes and double dividends in a dynamic economy," Journal of Policy Modeling, Elsevier, vol. 30(1), pages 19-32.
    2. Dalia Streimikiene & Indre Siksnelyte & Edmundas Kazimieras Zavadskas & Fausto Cavallaro, 2018. "The Impact of Greening Tax Systems on Sustainable Energy Development in the Baltic States," Energies, MDPI, vol. 11(5), pages 1-29, May.
    3. Jean-Christophe Caffet, 2005. "Health effects and optimal environmental taxes in welfare state countries," Cahiers de la Maison des Sciences Economiques v05049, Université Panthéon-Sorbonne (Paris 1).
    4. : Eduardo L. Giménez (a) & Miguel Rodríguez, "undated". "Pigou’S Dividend Versus Ramsey’S Dividend In The Double Dividend Literature," Working Papers 2-06 Classification-JEL :, Instituto de Estudios Fiscales.
    5. Hoel, Michael, 2008. "Environmental Taxes in an Economy with Distorting Taxes and a Heterogeneous Population," Memorandum 04/2008, Oslo University, Department of Economics.
    6. Crago, Christine Lasco & Khanna, Madhu, 2014. "Carbon abatement in the fuel market with biofuels: Implications for second best policies," Journal of Environmental Economics and Management, Elsevier, vol. 67(2), pages 89-103.
    7. Mireille Chiroleu-Assouline & Mouez Fodha, 2011. "Verdissement de la fiscalité. À qui profite le double dividende ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 409-431.
    8. Xavier Labandeira & José M. Labeaga & Xiral López-Otero, 2019. "New Green Tax Reforms: Ex-Ante Assessments for Spain," Sustainability, MDPI, vol. 11(20), pages 1-25, October.
    9. Ulrich Eydam & Francesca Diluiso, 2022. "How to Redistribute the Revenues from Climate Policy? A Dynamic Perspective with Financially Constrained Households," CEPA Discussion Papers 45, Center for Economic Policy Analysis.
    10. Jean-Denis Garon & Charles Séguin, 2021. "Environmental Tax Reform in a Federation with Rent-Induced Migration," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 78(3), pages 487-519, March.
    11. Manresa, Antonio & Sancho, Ferran, 2005. "Implementing a double dividend: recycling ecotaxes towards lower labour taxes," Energy Policy, Elsevier, vol. 33(12), pages 1577-1585, August.
    12. Emmanuel Combet & Frédéric Ghersi & Jean Charles Hourcade & Daniel Théry, 2010. "Carbon Tax and Equity : The Importance of Policy Design," Post-Print halshs-00692516, HAL.
    13. Tikoudis, Ioannis & Verhoef, Erik T. & van Ommeren, Jos N., 2015. "On revenue recycling and the welfare effects of second-best congestion pricing in a monocentric city," Journal of Urban Economics, Elsevier, vol. 89(C), pages 32-47.
    14. Eydam, Ulrich & Diluiso, Francesca, 2022. "How to Redistribute the Revenues from Climate Policy? A Dynamic Perspective with Heterogeneous Households," VfS Annual Conference 2022 (Basel): Big Data in Economics 264076, Verein für Socialpolitik / German Economic Association.
    15. Zylicz, Tomasz, 2010. "Goals and Principles of Environmental Policy," International Review of Environmental and Resource Economics, now publishers, vol. 3(4), pages 299-334, May.
    16. Cropper, Maureen L., 2000. "Has Economic Research Answered the Needs of Environmental Policy?," Journal of Environmental Economics and Management, Elsevier, vol. 39(3), pages 328-350, May.
    17. Haradhan Kumar Mohajan, 2011. "Optimal Environmental Taxes Due to Health Effect," KASBIT Business Journals (KBJ), Khadim Ali Shah Bukhari Institute of Technology (KASBIT), vol. 4, pages 1-19, December.
    18. Ahlberg, Joakim, 2006. "Optimal Taxation of Intermediate Goods in the Presence of Externalities: A Survey Towards the Transport Sector," Working Papers 2006:3, Swedish National Road & Transport Research Institute (VTI).
    19. Giménez, Eduardo L. & Rodríguez, Miguel, 2010. "Reevaluating the first and the second dividends of environmental tax reforms," Energy Policy, Elsevier, vol. 38(11), pages 6654-6661, November.
    20. Chung-Fu Lai, 2016. "Examining the Double Dividend Effect of Energy Tax with the Overlapping Generations Model," International Journal of Energy Economics and Policy, Econjournals, vol. 6(1), pages 53-57.

    More about this item

    Keywords

    equalization transfers; fiscal decentralization; economic growth; convergence;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mhr:finarc:sici:0015-2218(200903)65:1_122:etfdae_2.0.tx_2-q. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Wolpert (email available below). General contact details of provider: https://www.mohrsiebeck.com/fa .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.