دانلود رایگان مقاله عدم تمرکز مالی مطلوب: مفاهیم توزیع مجدد و رفاه

Abstract

The literature has been inconclusive regarding the welfare effects of fiscal decentralization (FD), defined here as the extent to which local governments collect and spend local tax revenues. We present an original model to investigate formally the distributional and welfare implications of FD. In contrast to the standard approach that compares the implications of full FD with that of centralization, we consider that the central government chooses the level of FD to maximize welfare in a heterogeneous country. Noncooperatively, local governments choose their tax collection effort to maximize local utility. We show that an increase in the tax rate leads optimal FD to increase so as to compensate for the welfare loss from decreasing optimal local tax effort. Hence, welfare and income distribution improve in FD at its intermediate, rather than extreme, levels. We coin this result as the decentralization-Laffer curve. As regional spillovers increase, FD is less desirable as it deteriorates welfare and income distribution. This finding provides a novel support for the decentralization theorem and contributes to the fiscal policy debate.

5. Conclusion

This paper contributes to the literature of fiscal decentralization by presenting a formal model to analyze the macroeconomic implications of optimizing fiscal decentralization (FD). We consider a framework where local governments determine their effective tax rates by choosing the degree of their tax collection effort optimally while the central government chooses FD optimally. Our benchmark case is when both local and central governments form their optimal decisions simultaneously in a non-cooperative fashion; we then also investigate the case of a sequential move game. Simulations are performed to assess the welfare effects of these interactions with and without the effect of spillovers across the regions. The main finding of the paper is that it is optimal to increase the rate of fiscal decentralization (FD) the higher the tax rate so as to maintain the welfare level, given that the optimal local tax collection effort (a*i ) decreases in the tax rate. Given the strategic complementarity between the optimal values of FD (ϕ*) and a*i , increasing ϕ* first leads to an increase in the tax revenue and then decreases it. Simulations also show that optimum welfare reaches its highest values and income distribution becomes most equitable at some medium range of ϕ*. We call this decentralization-Laffer curve. This formal result makes a notable contribution to the recent decentralization literature stating that extreme values of FD may not be optimal. A tax-Laffer curve is not observed, however, since the optimal choices of the central and local governments avoid the realization of the falling portion of the curve.