Publication detail

Centralization Trade-off with Non-Uniform Taxes

Author(s): doc. PhDr. Martin Gregor Ph.D., Peter Tuchyňa
Type: IES Working Papers
Year: 2005
Number: 81
Published in: IES WP 2005/81
Publishing place: Prague
Keywords: Decentralization, Local Public Goods, Distributive Politics, Political Economy
JEL codes: H40, H70, H72, P51
Suggested Citation:
Grants: GACR 402/05/H510 Ekonomická teorie politických trhů IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
Abstract: When local public goods are provided by a centralized authority, spillovers may be coordinated, but heterogeneity in preferences may be suppressed. Besley and Coate (2003) have already solved this classic trade-off for a uniform tax regime. Here, we extend their approach by allowing for a non-uniform tax regime. We find that centralization with our tax system necessarily increases welfare in comparison to uniform-tax centralization. Importantly, with non-cooperative legislators coming from homogenous districts, our centralization dominates decentralization for any degree of spillovers. In other cases, it at least improves odds of centralization, if measured by utilitarian yardstick.
Downloadable: WP 81_Tuchyna Gregor




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