Shared Tax Source and Public Expenditures
Autor/Author:
Matthias Wrede
Titel/Title:
Shared Tax Source and Public Expenditures
Jahr/Year:
December 1996
Zusammenfassung/Abstract:
The paper deals with a specific vertical assignment of public functions in a federation: Two levels of government share the tax sources and they also share the expenditures of public services. We consider surplus maximizing Leviathan governments which provide public services in order to increase the tax base. The Nash equilibrium is characterized by overtaxation and - depending on whether the entire tax base is complementary to public goods or a substitute for public goods - by underprovision or overprovision of public services. The welfare implications and the relationship with the concept of earmarking taxes are also considered.
Keywords:
Fiscal federalism, Leviathan, tax base overlap, fiscal externalities, taxation, public expenditures
JEL:
H71, H72, H77
Publiziert in/Published in:
BERG Working paper 16
Korrespondenzadresse des Autors/Correspondal address of the author:
Dr. Matthias Wrede
Department of Economics
University of Bamberg
D-96045 Bamberg