Overlapping soft budget constraints

Our paper identifies a potential problem with decentralization at a time when its virtues are widely extolled. We show that responsibility for equalization at multi-levels within a decentralized federation creates an overlapping equalization policy that can worsen fiscal discipline. Contrary to Qian and Roland (1998), we also show in our set-up that fiscal competition among regional rescuers does not act as a commitment device to harden the local budget constraint.

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Year of publication:	2010
Authors:	Breuillé, Marie-Laure ; Vigneault, Marianne
Published in:	Journal of Urban Economics. - Elsevier, ISSN 0094-1190. - Vol. 67.2010, 3, p. 259-269
Publisher:	Elsevier
Keywords:	Soft budget constraint Fiscal federalism Capital tax competition

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008565681