Fiscal federalism revisited
type: Item
instance of: scholarly article
title: Fiscal federalism revisited
zbMATH Open document ID: 0983.91044
author: Charles Blackorby
author: Craig Brett
published in: Journal of Economic Theory
publication date: 2002-04-23T00:00:00Z
review text: This paper analyses the conditions under which fiscal harmonization between, say, taxes levied at the Federal and at the Provincial level is desirable. When the Federal Government can levy taxes on all commodities, there is no benefit from fiscal harmonization as the economy operates on its efficiency frontier. However, this result is not true when the Federal Government can levy taxes on only a subset of commodities, and there is a production efficiency gain from tax harmonization. This latter case can arise if, for instance, some of the taxes the Federal Government would like to levy are at or below zero (assuming away the possibility of subsidies, i.e. negative taxes, which would correspond to revenue sharing between the two governments). By controlling taxes, the Federal Government is controlling indirectly consumer prices. Is the previous result true when the Federal Government controls directly prices rather than taxes? The answer is negative: if the Federal Government can control directly a subset of commodity prices, there is no productivity efficiency gains from fiscal harmonization. This last result shows that the often-used-in-practice procedure of looking at price distortion to infer tax distortion is misleading.
reviewed by: Gabriel Talmain
Mathematics Subject Classification ID: 91B64
zbMATH DE Number: 1508334
zbMATH Keywords: Fiscal federalism
zbMATH Keywords: Pareto optimum
zbMATH Keywords: tax harmonization
zbMATH Keywords: tax reform
MaRDI profile type: MaRDI publication profile
full work available at URL: jeth.2000.2643
OpenAlex ID: W1981510094
cites work: Expenditure Functions, Local Duality, and Second Order Approximations
cites work: Nine kinds of quasiconcavity and concavity
cites work: General statements on second best Pareto optimality
cites work: Q4320511
cites work: Equivalence in nonlinear programming
DOI: 10.1006/JETH.2000.2643
description: scientific article; zbMATH DE number 1508334