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IEB15-21_EstellerMore.pdf (1.22 MB)

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Working paper

Publication date

2015

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cc-by-nc-nd, (c) Esteller Moré et al., 2015
Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/115376

Fiscal equalization under political pressures

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Abstract

We examine the design of fiscal equalization transfers aimed at interregional redistribution in a setting in which special interest groups distort the fiscal policies of local governments. Equity always calls for tax-base equalization while efficiency calls for tax-base equalization of fiscal capacities backed by strong lobby groups and for taxrevenue equalization of those backed by weak lobby groups. Hence, it is optimal to rely only on tax-base equalization if the special interest groups are similar in terms of lobbying power, whereas a mixed system is optimal if they are highly heterogeneous. Tax competition reinforces the role of tax-base, while tax exporting that of tax-revenue, fiscal equalization.

Subject

Política fiscal, Impostos, Distribució (Teoria de la probabilitat)

Subject (English)

Fiscal policy, Taxation, Distribution (Probability theory)

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IEB (Institut d’Economia de Barcelona) – Working Papers

Citation

ESTELLER MORÉ, Alejandro, GALMARINI, Umberto and RIZZO, Leonzio. Fiscal equalization under political pressures. IEB Working Paper 2015/21. [consulted: 8 of August of 2026]. Available at: https://hdl.handle.net/2445/115376

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