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Incentives underlying tax policies in a decentralized federation with horizontal leadership and transboundary environmental damage

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  • Lars Persson

Abstract

This paper concerns income- and production taxation in a decentralized fiscal federalism model where the ability to commit differs among member countries. It is assumed that the federal government dictates environmental targets to be implemented at the national level, where the horizontal leader has commitment power vis-à-vis the other country (the follower). The results show how incentives underlying the horizontal leader’s tax policies are influenced by the decision structure. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Lars Persson, 2015. "Incentives underlying tax policies in a decentralized federation with horizontal leadership and transboundary environmental damage," Letters in Spatial and Resource Sciences, Springer, vol. 8(1), pages 77-88, March.
    • Handle: RePEc:spr:lsprsc:v:8:y:2015:i:1:p:77-88
    DOI: 10.1007/s12076-014-0123-1
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    References listed on IDEAS

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    1. Aronsson, Thomas & Persson, Lars, 2012. "Decentralized Fiscal Federalism Revisited: Optimal Income Taxation and Public Goods under Horizontal Leadership," Umeå Economic Studies 839, Umeå University, Department of Economics.
    2. Frederick Ploeg & Aart Zeeuw, 1992. "International aspects of pollution control," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(2), pages 117-139, March.
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    4. Aronsson, Thomas & Blomquist, Soren, 2003. "Optimal taxation, global externalities and labor mobility," Journal of Public Economics, Elsevier, vol. 87(12), pages 2749-2764, December.
    5. Aronsson, Thomas & Persson, Lars, 2012. "Decentralized fiscal federalism revisited: Optimal income taxation and public goods under horizontal leadership," Economics Letters, Elsevier, vol. 117(1), pages 223-226.
    6. Aronsson, Thomas, 2010. "Optimal income taxation and decentralized fiscal federalism," Regional Science and Urban Economics, Elsevier, vol. 40(4), pages 187-195, July.
    7. Thomas Aronsson Aronsson & Thomas Jonsson & Tomas Sjögren, 2006. "Environmental Policy and Optimal Taxation in a Decentralized Economic Federation," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(3), pages 437-454, September.
    8. Christiansen, Vidar, 1984. "Which commodity taxes should supplement the income tax?," Journal of Public Economics, Elsevier, vol. 24(2), pages 195-220, July.
    9. Carlo Carraro (ed.), 2003. "The Endogenous Formation of Economic Coalitions," Books, Edward Elgar Publishing, number 2999.
    10. Caplan, Arthur J. & Silva, Emilson C. D., 1999. "Federal Acid Rain Games," Journal of Urban Economics, Elsevier, vol. 46(1), pages 25-52, July.
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    More about this item

    Keywords

    Optimal taxation; Fiscal federalism; Decentralized leadership; Horizontal leadership; D31; D62; D82; H21; H23; H70;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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