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Optimal taxation and risk-sharing arrangements in an economic federation
Umeå University, Faculty of Social Sciences, Department of Economics.
Umeå University, Faculty of Social Sciences, Department of Economics.
2003 (English)In: Oxford Economic Papers, ISSN 0030-7653, E-ISSN 1464-3812, Vol. 55, no 1, 104-120 p.Article in journal (Refereed) Published
Abstract [en]

This paper analyzes optimal taxation and risk‐sharing arrangements in an economy with two levels of government. Both levels provide public goods and finance their expenditures via labor income taxation, where the tax base is responsive to the private agents' labor supply decisions. The localities are assumed to experience different random productivity shocks, meaning that       the private labor supply decision as well as the choices of income tax rates are carried out under uncertainty. Part of the central government's decision problem is then to provide tax revenue sharing between the local governments. The optimal degree of revenue sharing depends on whether or not the localities/regions differ with respect to labor supply incentives.

Place, publisher, year, edition, pages
Oxford University Press, 2003. Vol. 55, no 1, 104-120 p.
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URN: urn:nbn:se:umu:diva-16236DOI: 10.1093/oep/55.1.104OAI: diva2:155909
Available from: 2007-09-05 Created: 2007-09-05 Last updated: 2012-08-27Bibliographically approved

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