How do local governments decide on public policy in fiscal federalism? Tax vs. expenditure optimization

• 成果类型: Article
• 署名作者: Koethenbuerger, Marko
• 署名单位: University of Copenhagen
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2011.06.006
• 发表日期: 2011
• 页码: 1516-1522
• 关键词: Tax vs. expenditure optimization; FEDERALISM; Endogenous commitment; fiscal incentives; Policy interaction

摘要

Previous literature widely assumes that taxes are optimized in local public finance while expenditures adjust residually. This paper endogenizes the choice of the optimization variable. In particular, it analyzes how federal policy toward local governments' influences the way local governments decide on public policy. Unlike the usual presumption, the paper shows that local governments may choose to optimize over expenditures. The result holds when federal policy subsidizes local taxation. The results offer a new perspective of the efficiency implications of federal policy toward local governments and, thereby, enable a more precise characterization of local government behavior in fiscal federalism. (C) 2011 Elsevier B.V. All rights reserved.