An Optimal Taxation Approach to Fiscal Federalism

26 Pages Posted: 15 Mar 2004

See all articles by Roger H. Gordon

Roger H. Gordon

University of California, San Diego (UCSD) - Department of Economics; Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: October 1982

Abstract

In a Federal system of government, each unit of government decides independently how much of each type of public good to provide, and what types of taxes, and which tax rates, to use in funding the public goods. In this paper we explore what types of problems can arise from this decentralized form of decision-making. In particular, we describe systematically the types of externalities that one unit of government can create for nonresidents, through both its public goods decisions and its taxation decisions. The paper also explores briefly what the central government might do to lessen the costs of decentralized decision-making.

Suggested Citation

Gordon, Roger H., An Optimal Taxation Approach to Fiscal Federalism (October 1982). NBER Working Paper No. w1004. Available at SSRN: https://ssrn.com/abstract=304746

Roger H. Gordon (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

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Harvard University - Department of Economics ( email )

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United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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