The welfare costs of Tiebout sorting with true public goods
JournalArticle (Originalarbeit in einer wissenschaftlichen Zeitschrift)
ID 4506920
Author(s) Kuhlmey, Florian; Hintermann, Beat
Author(s) at UniBasel Hintermann, Beat
Year 2019
Title The welfare costs of Tiebout sorting with true public goods
Journal International tax and public finance
Volume 26
Number 5
Pages / Article-Number 1166-1210
Keywords Public goods, Tiebout, local income taxation, fiscal federalism, decentralization, free-riding
Abstract We develop a model of Tiebout sorting based on decentralized income taxation, which allows for spillovers and imperfect rivalry in consumption of the publicly provided good. We identify three sources of welfare loss from decentralization: Imperfect redistribution, inter-jurisdictional free-riding, and inefficient residential choice. Whereas the welfare loss from imperfect redistribution decreases and that from free-riding rises unambiguously as the publicly provided good becomes more pure, the welfare loss from the inefficient residential choice depends non-monotonically on spillovers and rivalry. The equilibrium can be characterized by relative crowding of either the rich or the poor municipality. Our results imply that the characteristics of the publicly provided good are an important determinant for the welfare costs of decentralization.
Publisher Springer
ISSN/ISBN 0927-5940 ; 1573-6970
Full Text on edoc Available
Digital Object Identifier DOI 10.1007/s10797-019-09534-z
ISI-Number WOS:000483757000008
Document type (ISI) Article

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