The structure of authority, federalism, commitment and economic growth

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Title:	The structure of authority, federalism, commitment and economic growth
Authors:	艾德榮;Ronald Alan Edwards
Contributors:	淡江大學經濟學系
Keywords:	Federalism;Institutions;Commitment;Time consistency;Growth theory;Game theory;Political economy
Date:	2005-04-01
Issue Date:	2009-11-30 18:36:35 (UTC+8)
Publisher:	Springer
Abstract:	In a neoclassical growth model with many regions and a mobile factor, two federal arrangements are considered. In the first federal arrangement the central government chooses a uniform tax policy, whereas in the second each regional government chooses its own tax policy. The main result is that the first federal arrangement leads to high tax rates and economic stagnation, whereas the second leads to low tax rates and economic growth. This result stems from a time consistency problem. The lack of tax competition forces a time consistency problem on the central government under the first federal arrangement. In contrast, regional tax competition acts as a commitment device under the second federal arrangement. The fundamental feature in the environment that gives rise to different abilities of the state to commit is the different structure of authority within the state.
Relation:	Economic Theory 25(3), pp.629-648
DOI:	10.1007/s00199-003-0457-1
Appears in Collections:	[Graduate Institute & Department of Economics] Journal Article

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