Details
| Original language | English |
|---|---|
| Pages (from-to) | 49-59 |
| Number of pages | 11 |
| Journal | Journal of urban economics |
| Volume | 93 |
| Early online date | 25 Mar 2016 |
| Publication status | Published - May 2016 |
Abstract
The idea of laboratory federalism provides a strong argument in favor of fiscal decentralization. It views autonomous jurisdictions in a federation as laboratories where new policies can be tested at low risk for the entire system. If successful, these policies will spread out by imitation; otherwise, they will be discarded. Studying this idea in a dynamic setting of fiscal competition, we show that, due to externalities between jurisdictions, policies that appear successful and are therefore mimicked do not necessarily enhance welfare, and vice versa. Specifically, in the classical framework of decentralized, rich-to-poor income redistribution with labor mobility the long-run outcome entails a complete breakdown of redistribution with zero subsidies to the poor everywhere.
Keywords
- Asymmetric ESS, Laboratory federalism, Mobility, Redistribution
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
- Social Sciences(all)
- Urban Studies
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In: Journal of urban economics, Vol. 93, 05.2016, p. 49-59.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Decentralized redistribution in a laboratory federation
AU - Ania, Ana B.
AU - Wagener, Andreas
N1 - Publisher Copyright: © 2016 Elsevier Inc.
PY - 2016/5
Y1 - 2016/5
N2 - The idea of laboratory federalism provides a strong argument in favor of fiscal decentralization. It views autonomous jurisdictions in a federation as laboratories where new policies can be tested at low risk for the entire system. If successful, these policies will spread out by imitation; otherwise, they will be discarded. Studying this idea in a dynamic setting of fiscal competition, we show that, due to externalities between jurisdictions, policies that appear successful and are therefore mimicked do not necessarily enhance welfare, and vice versa. Specifically, in the classical framework of decentralized, rich-to-poor income redistribution with labor mobility the long-run outcome entails a complete breakdown of redistribution with zero subsidies to the poor everywhere.
AB - The idea of laboratory federalism provides a strong argument in favor of fiscal decentralization. It views autonomous jurisdictions in a federation as laboratories where new policies can be tested at low risk for the entire system. If successful, these policies will spread out by imitation; otherwise, they will be discarded. Studying this idea in a dynamic setting of fiscal competition, we show that, due to externalities between jurisdictions, policies that appear successful and are therefore mimicked do not necessarily enhance welfare, and vice versa. Specifically, in the classical framework of decentralized, rich-to-poor income redistribution with labor mobility the long-run outcome entails a complete breakdown of redistribution with zero subsidies to the poor everywhere.
KW - Asymmetric ESS
KW - Laboratory federalism
KW - Mobility
KW - Redistribution
UR - http://www.scopus.com/inward/record.url?scp=84962197481&partnerID=8YFLogxK
U2 - 10.1016/j.jue.2016.03.002
DO - 10.1016/j.jue.2016.03.002
M3 - Article
AN - SCOPUS:84962197481
VL - 93
SP - 49
EP - 59
JO - Journal of urban economics
JF - Journal of urban economics
SN - 0094-1190
ER -