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A Computable General Equilibrium Model of Intergovernmental Aid

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  • Thomas J. Nechyba

Abstract

This paper introduces a computable general equilibrium model of intergovernmental relations in which heterogeneous agents (i) are endowed with income and houses, (ii) are fully mobile between multiple jurisdictions, and (iii) vote in both local and state elections to determine local property and state income tax rates. The model is calibrated to New Jersey micro tax data and used to study the general equilibrium effects of state government policies. Three different types of intergovernmental programs are analyzed: (i) redistributive revenue sharing, (ii) district power equalization and (iii) deductibility of local taxes. The approach facilitates a heretofore difficult comparative analysis in that it provides for an integrated investigation of these programs in a single general equilibrium model.

Suggested Citation

  • Thomas J. Nechyba, 1996. "A Computable General Equilibrium Model of Intergovernmental Aid," NBER Working Papers 5420, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5420
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    Cited by:

    1. Thomas J. Nechyba, 2003. "Centralization, Fiscal Federalism, and Private School Attendance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 179-204, February.
    2. Caroline M. Hoxby, 2001. "All School Finance Equalizations are Not Created Equal," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1189-1231.
    3. Thomas J. Nechyba, 2000. "Mobility, Targeting, and Private-School Vouchers," American Economic Review, American Economic Association, vol. 90(1), pages 130-146, March.
    4. Raquel Fernandez & Richard Rogerson, 2003. "Equity and Resources: An Analysis of Education Finance Systems," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 858-897, August.
    5. Thomas Nechyba, 1996. "Fiscal federalism and local public finance: A computable general equilibrium (CGE) framework," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(2), pages 215-231, May.
    6. Deltas, George & Van Der Beek, Gregor, 2003. "Modeling fiscal federalism: a decomposition analysis of changes in intra-European Union budgetary transfers," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(4), pages 592-613.
    7. Raquel Fernandez, 2001. "Sorting, Education and Inequality," NBER Working Papers 8101, National Bureau of Economic Research, Inc.
    8. Nechyba, Thomas J. & Strauss, Robert P., 1998. "Community choice and local public services: A discrete choice approach," Regional Science and Urban Economics, Elsevier, vol. 28(1), pages 51-73, January.
    9. Debra Hevenstone & Ben Jann, 2016. "Fiscal Federalism and Tax Equalization: The potential for progressive local taxes," University of Bern Social Sciences Working Papers 19, University of Bern, Department of Social Sciences.
    10. Thomas J. Nechyba, 1996. "Public School Finance in a General Equilibrium Tiebout World: Equalization Programs, Peer Effects and Private School Vouchers," NBER Working Papers 5642, National Bureau of Economic Research, Inc.
    11. Thomas J. Nechyba, 2006. "Alternative education finance strategies," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Mar, pages 7-27.
    12. de Bartolome, Charles A. M. & Ross, Stephen L., 2003. "Equilibria with local governments and commuting: income sorting vs income mixing," Journal of Urban Economics, Elsevier, vol. 54(1), pages 1-20, July.
    13. Berrittella, Maria, 2017. "Can stability of foreign aid agreement reduce global income inequality?," Economic Analysis and Policy, Elsevier, vol. 54(C), pages 105-111.
    14. Thomas J. Nechyba, 1999. "A Model of Multiple Districts and Private Schools: The Role of Mobility, Targeting, and Private School Vouchers," NBER Working Papers 7239, National Bureau of Economic Research, Inc.
    15. Fernández, Raquel, 2001. "Sorting, Education and Inequality," CEPR Discussion Papers 3020, C.E.P.R. Discussion Papers.

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    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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