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Fiscal Constitutions

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  • Hans Gersbach

Abstract

In this paper we examine how individuals should be treated with respect to taxes, subsidies and agenda setting in constitutions in order to obtain efficient allocations of public goods and to limit tax distortions. We show that if public goods are socially desirable, the simple majority rule as well as taxation constrained to majority winners or a ban on subsidies are second-best constitutions. Equal treatment regarding taxes and subsidies is undesirable . Super majority rules and equal treatment of all citizens with respect to taxes and subsidies, however, is first-best if public goods are socially undesirable. The ex ante expectation of the share and welfare improvements of socially efficient public goo ds determines which constitution a society will adopt.

Suggested Citation

  • Hans Gersbach, 1999. "Fiscal Constitutions," CESifo Working Paper Series 223, CESifo.
    • Handle: RePEc:ces:ceswps:_223
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    References listed on IDEAS

    as
    1. Laffont, Jean-Jacques, 1996. "Industrial policy and politics," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 1-27.
    2. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63(4), pages 309-309.
    3. Buchanan, J M, 1998. "Majoritarian Logic," Public Choice, Springer, vol. 97(1-2), pages 13-21, October.
    4. Caplin, Andrew S & Nalebuff, Barry J, 1988. "On 64%-Majority Rule," Econometrica, Econometric Society, vol. 56(4), pages 787-814, July.
    5. Gersbach, Hans, 1992. "Allocation of information by majority decisions," Journal of Public Economics, Elsevier, vol. 48(2), pages 259-268, July.
    6. Rae, Douglas W., 1969. "Decision-Rules and Individual Values in Constitutional Choice," American Political Science Review, Cambridge University Press, vol. 63(1), pages 40-56, March.
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    Cited by:

    1. Bos, Dieter & Kolmar, Martin, 2003. "Anarchy, efficiency, and redistribution," Journal of Public Economics, Elsevier, vol. 87(11), pages 2431-2457, October.
    2. Hans Gersbach & Volker Hahn & Stephan Imhof, 2013. "Tax rules," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(1), pages 19-42, June.

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