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. |
