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The Tragedy of the Commons or the Curse of Federalism

Author

Listed:
  • Laurent Bouton

    (ECARES, Université Libre de Bruxelles)

  • Marjorie Gassner

    (ECARES, Université Libre de Bruxelles)

  • Vincenzo Verardi

    (ECARES, Université Libre de Bruxelles)

Abstract

It has been suggested that …scal federalism is a good way to induce decentralized entities to behave parsimoniously, but this has been largely criticized in the literature, in particular because of the Common-Pool problem. In this paper, we present an extra facet of the latter problem. We present a simple theoretical model con…rmed by empirical evidence suggesting that vertical imbalance induces govenments to substitute redistributive spending for non-distributive expenditures. This drives …scal policies to be less efficient in reducing income inequality.

Suggested Citation

  • Laurent Bouton & Marjorie Gassner & Vincenzo Verardi, 2005. "The Tragedy of the Commons or the Curse of Federalism," Public Economics 0511013, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwppe:0511013
    Note: Type of Document - pdf; pages: 29
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    Cited by:

    1. Division of Policy and Practice,UNICEF, 2010. "Advancing the Rights of Children, Women and Poor Families through Better Public Finance Policies," Working papers 1001, UNICEF,Division of Policy and Strategy.

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    More about this item

    Keywords

    Federalism; Income Inequality; Common Pool; Redistribution;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H - Public Economics

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