Publication detail

Centralization Trade-off with Non-Uniform Taxation

Author(s): doc. PhDr. Martin Gregor Ph.D., Tuchyňa, Peter
Type: Articles in refereed journals
Year: 2007
Number: 3
ISSN / ISBN: 1802-4696
Published in: The Czech Economic Review, 1 (3), 223-253
Publishing place: Prague
Keywords: decentralization, taxation, local public goods
JEL codes: H40, H70, H72, P51
Suggested Citation:
Grants: 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 are internalized, but heterogeneity in preferences may be suppressed. Besley and Coate (2003) recently examined this classic trade-off for a uniform tax regime with strategic delegation. Here, we extend their approach by allowing for a non-uniform tax regime. We find that centralization with nonuniform taxation unambiguously increases welfare in comparison to uniform-tax centralization.
With non-cooperative legislators coming from symmetric districts, our centralization dominates decentralization for any degree of spillovers. In other cases, non-uniform taxation at least improves the odds of centralization, if measured by a utilitarian yardstick.

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