On federal transfers and incentives [Elektronische Ressource] / Martin Altemeyer-Bartscher
174 Pages
English
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On federal transfers and incentives [Elektronische Ressource] / Martin Altemeyer-Bartscher

Downloading requires you to have access to the YouScribe library
Learn all about the services we offer
174 Pages
English

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On Federal Transfersand IncentivesDissertation zur Erlangung des akademischen Gradeseines Doktors der Wirtschaftswissenschaften durch dieTechnische Universit¨at ChemnitzMai 2009Martin Altemeyer-BartscherJablonskistraße 1110405 BerlinOn Federal Transfers and IncentivesMartin Altemeyer-BartscherMai 20092Contents1 Introduction 171.1 Transfers and Competition in Federal States . . . . . . . . . . . 171.2 Purpose of the Study . . . . . . . . . . . . . . . . . . . . . . . . . 241.3 Limits of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . 241.4 Outline of the Dissertation . . . . . . . . . . . . . . . . . . . . . . 251.4.1 Benecial Tax Competition . . . . . . . . . . . . . . . . . 251.4.2 The Ex-Post Dilemma in Fiscal Federalism . . . . . . . . 261.4.3 Transfers and Informational Externalities . . . . . . . . . 271.4.4 Tax Base Equalizing and Incentives . . . . . . . . . . . . 271.4.5 Internalizing Interregional Spillovers . . . . . . . . . . . . 282 Transfers and Incentives in Fiscal Federalism 292.1 Community preference model . . . . . . . . . . . . . . . . . . . . 292.2 The mainline theory and the new political economy . . . . . . . . 302.3 Informational Asymmetries in Federations: Theory and Evidence 312.4 Mechanism design approach in scal federalism . . . . . . . . . . 352.5 The equity argument in federal states around the world . . . . 373 Bene cial Tax Competition 393.1 Tax Competition and Screening Informational Types . . . . .

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Published 01 January 2009
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On Federal Transfers
and Incentives
Dissertation zur Erlangung des akademischen Grades
eines Doktors der Wirtschaftswissenschaften durch die
Technische Universit¨at Chemnitz
Mai 2009
Martin Altemeyer-Bartscher
Jablonskistraße 11
10405 BerlinOn Federal Transfers and Incentives
Martin Altemeyer-Bartscher
Mai 20092Contents
1 Introduction 17
1.1 Transfers and Competition in Federal States . . . . . . . . . . . 17
1.2 Purpose of the Study . . . . . . . . . . . . . . . . . . . . . . . . . 24
1.3 Limits of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . 24
1.4 Outline of the Dissertation . . . . . . . . . . . . . . . . . . . . . . 25
1.4.1 Benecial Tax Competition . . . . . . . . . . . . . . . . . 25
1.4.2 The Ex-Post Dilemma in Fiscal Federalism . . . . . . . . 26
1.4.3 Transfers and Informational Externalities . . . . . . . . . 27
1.4.4 Tax Base Equalizing and Incentives . . . . . . . . . . . . 27
1.4.5 Internalizing Interregional Spillovers . . . . . . . . . . . . 28
2 Transfers and Incentives in Fiscal Federalism 29
2.1 Community preference model . . . . . . . . . . . . . . . . . . . . 29
2.2 The mainline theory and the new political economy . . . . . . . . 30
2.3 Informational Asymmetries in Federations: Theory and Evidence 31
2.4 Mechanism design approach in scal federalism . . . . . . . . . . 35
2.5 The equity argument in federal states around the world . . . . 37
3 Bene cial Tax Competition 39
3.1 Tax Competition and Screening Informational Types . . . . . . . 39
3.2 Model and Problem . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.2.1 Local government policy . . . . . . . . . . . . . . . . . . . 44
3.2.2 Central government policy . . . . . . . . . . . . . . . . . . 47
34 CONTENTS
3.2.3 The timing of the game . . . . . . . . . . . . . . . . . . . 48
3.3 Full Information Policy . . . . . . . . . . . . . . . . . . . . . . . . 48
3.4 Incentive-Compatible Transfer Schemes . . . . . . . . . . . . . . 53
3.5 Second-Best Optimal Tax Autonomy . . . . . . . . . . . . . . . . 58
4 The Ex-Post Dilemma in Fiscal Federalism 61
4.1 The Ex-Post Dilemma and Informational Asymmetries . . . . . . 61
4.2 Model and Problem . . . . . . . . . . . . . . . . . . . . . . . . . 68
4.2.1 The local government’s policy . . . . . . . . . . . . . . . . 68
4.2.2 The timing of the game . . . . . . . . . . . . . . . . . . . 71
4.2.3 The central government’s policy . . . . . . . . . . . . . . 71
4.3 Ex-Ante Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 72
4.4 Ex-Post Transfer Schemes . . . . . . . . . . . . . . . . . . . . . . 76
4.4.1 Tax incentives . . . . . . . . . . . . . . . . . . . . . . . . 77
4.4.2 Incentives for long-term policy . . . . . . . . . . . . . . . 80
4.5 Recapitulating the E ects of Ex-Post Transfers . . . . . . . . . . 81
5 Transfers and Informational Externalities 83
5.1 Interregional Interaction and Expectation . . . . . . . . . . . . . 83
5.2 The Basic Model . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
5.3 Equalizing Grants in a Non-Correlated World . . . . . . . . . . . 92
5.3.1 The innovation policy . . . . . . . . . . . . . . . . . . . . 95
5.4 Equalizing Grants with Yardstick Competition . . . . . . . . . . 97
5.5 Yardsticks and Transfers . . . . . . . . . . . . . . . . . . . . . . . 101
6 Tax Base Equalizing and Incentives 103
6.1 Competition for Tax Base Equalizing Grants . . . . . . . . . . . 103
6.2 Model and Problem . . . . . . . . . . . . . . . . . . . . . . . . . 108
6.2.1 Basic model . . . . . . . . . . . . . . . . . . . . . . . . . . 108CONTENTS 5
6.2.2 Federal government objective . . . . . . . . . . . . . . . . 111
6.2.3 First best optimal tax policy . . . . . . . . . . . . . . . . 112
6.2.4 Uncoordinated policy . . . . . . . . . . . . . . . . . . . . 112
6.3 Full information policy: . . . . . . . . . . . . . . . . . . . . . . . 114
6.4 Tax Base Equalizing with Adverse Selection . . . . . . . . . . . . 116
6.5 Incentive E ects of Tax Base Equalizing . . . . . . . . . . . . . . 121
7 Internalizing Interregional Spillovers 123
7.1 Schemes to Combat Transboundary Spill Overs . . . . . . . . . . 123
7.2 The Basic Model . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
7.2.1 Transboundary Pollution Spillovers . . . . . . . . . . . . 128
7.2.2 The Individual Household’s Maximization Problem . . . . 129
7.2.3 Take-it-or-leave-it O er . . . . . . . . . . . . . . . . . . . 130
7.2.4 The First-best Policy . . . . . . . . . . . . . . . . . . . . . 130
7.3 Unilateral Externalities . . . . . . . . . . . . . . . . . . . . . . . 131
7.3.1 The Relationship between Taxes and Transfers . . . . . . 132
7.3.2 Jurisdictions’ Choices . . . . . . . . . . . . . . . . . . . . 133
7.4 Reciprocal Externalities . . . . . . . . . . . . . . . . . . . . . . . 134
7.4.1 Relationship between Taxes and Transfers . . . . . . . . . 134
7.4.2 Transfer-paying Jurisdiction 1’s Maximization Problem . 135
7.5 Price Mechanisms Versus the Kyoto Protocol . . . . . . . . . . . 136
8 Conclusion 139
9 Appendix 145
9.1 Proof of Lemma 1 . . . . . . . . . . . . . . . . . . . . . . . . . . 145
9.2 Proof of Lemma 2: . . . . . . . . . . . . . . . . . . . . . . . . . . 146
9.3 Proof of Theorem 1: . . . . . . . . . . . . . . . . . . . . . . . . . 146
9.4 Interior solution: . . . . . . . . . . . . . . . . . . . . . . . . . . . 1486 CONTENTS
9.5 Proof of Proposition 3 . . . . . . . . . . . . . . . . . . . . . . . . 148
9.6 Proof of Proposition 5 . . . . . . . . . . . . . . . . . . . . . . . . 149
9.7 Dominant strategy implementation . . . . . . . . . . . . . . . . . 150
9.8 Proof of Proposition 7 and 9 . . . . . . . . . . . . . . . . . . . . 151
9.9 Proof of Proposition 8 . . . . . . . . . . . . . . . . . . . . . . . . 152Erklarung
Ich erkl are, die hier vorliegende Dissertation selbstandig verfasst zu haben, und
andere als die angegebenen Hilfsmittel nicht benutzt zu haben. Weitere
Personen, insbesondere Promotionsberater, waren an der geistigen Herstellung dieser
Arbeit nicht beteiligt. Weder fruher noch zum jetzigen Zeitpunkt habe ich ein
Promotionsverfahren an einer anderen Stelle beantragt. Die Abhandlung wurde
bisher keinem wissenschaftlichen Gremium vorgelegt.
Chemnitz, 18. Mai 2009
Martin Altemeyer-Bartscher
78