Work

Vertical externalities with lump-sum taxes: how much difference does unemployment make?

Year: 2014

Type: article

Abstract: This paper analyses how the existence of unemployment affects the conventional approach to vertical externalities. We discuss the optimality rule for the provision of public inputs both in a unitary and in a federal state. Our findings indicate that decentralising spending responsability on public inputs in the presence of unemployment allows output to be closer to the first best level. Moreover, we describe the inability of the federal government, behaving as a Stackelberg leader, to replicate the unitary outcome, unless there are new policy instruments at government's disposal.

Source: European Journal of Government and Economics

DOI: 10.17979/ejge.2014.3.1.4298

Authors: Diego Martinez-Lopez, Tomas Sjongren

Institutions: Universidad Pablo de Olavide, Umeå University

Language: English

Topic: Local Government Finance and Decentralization

Subfield: Political Science and International Relations

Field: Social Sciences

Domain: Social Sciences

SDGs: Decent work and economic growth, Peace, justice, and strong institutions

Open Access status: diamond

Funders: Forskningsrådet för Arbetsliv och Socialvetenskap, Riksbankens Jubileumsfond