Fiscal federalism : essays on competition, equalization and cooperation/
(2006)
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- Authors
- Supervisors
- Tulkens, Henry
- Abstract
- (en) Fiscal federalism is meant to benefit from both the advantages of centralization and decentralization in public revenues and expenditures, the optimal allocation of competencies between levels of governement depending on the nature of revenues, public goods or services. For historical, political or practical reasons, this optimal allocation is not always attainable. Therefore, fiscal federalism may raise new issues in efficiency or equity, in the form of spill-over effects, harmful fiscal competition or fiscal imbalance. To tend to the optimum, it is necessary to evaluate the extent of inefficiencies or inequities and to design corrective mechanisms in order to minimize them. This thesis adopts such an approach in four different situations. First, we measure empirically and dynamically the presence of fiscal competition between Belgian municipalities. The analysis reveals the existence of fiscal competition, but with a rather slow pace of adjustment of taxe rates over time. This pace depends on the mobility of tax bases and on the similarity of neighboring municipalities with respect to some socio-economic characteristics. Second, we evaluate the effects of the Belgian fiscal equalization mechanism on equity. This analysis shows the existence of a poverty trap at the level of regions and proposes a range of solutions, inspired by equalization mechanisms applied in other federal States. Third, we analyse the case of multiple States emitting multiple pollutants where a trade-off exists between producing goods and minimizing pollution. We propose a form of inter-State transfers such that all States adopt a behaviour leading to the collective optimum. To be sustainable, the collective optimum must be individually rational. We show that this condition is respected with the proposed transfer formula. Fourth, we examine the case of harmful fiscal competition between two countries differing in size, the small country being seen as a fiscal heaven. In order to reach the collective optimum, fiscal cooperation is needed. To convince the tax heaven to cooperate, a specific formula of transfers between the large and the small country is proposed, such that both countries are better off.
- Affiliations
Citations
Verdonck, M. (2006). Fiscal federalism : essays on competition, equalization and cooperation/. https://hdl.handle.net/2078.5/128708