Federal Fiscal Constitutions: Risk Sharing and Redistribution
Journal of Political Economy
1996
This paper studies the political and economic determinants of regional public transfers. Specifically, it focuses on how such transfers are shaped by alternative fiscal constitutions, where a constitution is an allocation of fiscal instruments across different levels of governments plus a procedure for the collective choice of these instruments. Realistic restrictions on fiscal instruments introduce a trade-off between risk sharing and redistribution. Different constitutions produce very different results. In particular, a federal social insurance scheme, chosen by voting, provides overinsurance, whereas an intergovernmental transfer scheme, chosen by bargaining, provides underinsurance. Copyright 1996 by University of Chicago Press.
- DOI
- 10.1086/262049
- Volume
- 104 (5)
- Pages
- 979-1009
- Language
- en
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