We propose a theory of tax centralization and inter governmental grants in politico-economic equilibrium. The cost of taxation differs across levels of government because voters internalize general equilibrium effects at the central but not at the local level. This renders the degree of tax...

We extend 'economic equivalence' results, like the Ricardian equivalence proposition, to the political sphere where policy is chosen sequentially. We derive conditions under which a policy regime (summarizing admissible policy choices in every period) and a state are 'politico-economically...

We extend "economic equivalence" results, like the Ricardian equivalence proposition, to the political sphere where policy is chosen sequentially. We derive conditions under which a policy regime (summarizing admissible policy choices in every period) and a state are "politico-economically...

We extend "economic equivalence" results, like the Ricardian equivalence proposition, to the political sphere where policy is chosen sequentially. We derive conditions under which a policy regime (summarizing admissible policy choices in every period) and a state are "politico-economically...

We propose a theory of tax centralization and inter governmental grants in politico-economic equilibrium. The cost of taxation differs across levels of government because voters internalize general equilibrium effects at the central but not at the local level. This renders the degree of tax...

This paper reviews theoretical results on financial policy. We use basic accounting identities to illustrate relations between gross assets and liabilities, net debt positions and the appropriation of (primary) budget surplus funds. We then discuss Ramsey policies, answering the question how a...

We propose a theory of tax centralization in politico-economic equilibrium. Taxation has dynamic general equilibrium implications which are rationally internalized at the federal, but not at the regional level. The political support for taxation therefore differs across levels of government....