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Redistribution and Provision of Public Goods in an Economic Federation
Author(s) -
ARONSSON THOMAS,
BLOMQUIST SÖREN
Publication year - 2008
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2008.00354.x
Subject(s) - redistribution (election) , public good , locality , economics , local government , government (linguistics) , distribution (mathematics) , public economics , central government , transfer payment , income distribution , microeconomics , market economy , inequality , political science , public administration , mathematical analysis , linguistics , philosophy , mathematics , politics , welfare , law
This paper concerns redistribution and public good provision in an economic federation with two levels of government: a local government in each locality and a (first mover) central government. Each locality is characterized by two ability‐types, and the ability‐distribution differs across localities. The central government redistributes via a nonlinear income tax and a lump‐sum transfer to each local government, while the local governments use proportional income taxes and provide local public goods. We show how the redistributive role of taxation is combined with a corrective role, and how the central government can implement the second best resource allocation.