Tobin meets Oates: Solidarity and the optimal fiscal federal structure

Xavier Calsamiglia, Teresa Garcia-Milà, Therese J. McGuire

Research output: Contribution to journalArticle

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Abstract

We explore the implications for the optimal degree of fiscal decentralization when people's preferences for goods and services-which classic treatments of fiscal federalism (Oates in Fiscal federalism, 1972) place in the purview of local governments-exhibit specific egalitarianism (Tobin in J. Law Econ. 13(2): 263-277, 1970), or solidarity. We find that a system in which the central government provides a common minimum level of the publicly provided good, and local governments are allowed to use their own resources to provide an even higher local level, performs better from an efficiency perspective relative to all other systems analyzed for a relevant range of preferences over solidarity.

Original languageEnglish (US)
Pages (from-to)450-473
Number of pages24
JournalInternational Tax and Public Finance
Volume20
Issue number3
DOIs
Publication statusPublished - Jun 1 2013

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Keywords

  • Externality
  • Fiscal decentralization
  • Free riding
  • Solidarity
  • Specific egalitarianism

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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