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ralph lauren polo

Pascale Duran-vigneron
''When transparency goes against efficiency: fiscal equalization in a context of firm and household mobility ''
The purpose of this paper is to investigate how the mobility of households and firms affects economic efficiency and whether a transparent system of equalization payments can be efficiency enhancing. When local governments choose their fiscal policy taking into account the impact the policy will have on migration, the decentralized equilibrium does not result in a socially efficient allocation: central government intervention is required. However, assuming the transparency of fiscal equalization -- that is local governments know the transfer formulas as it is advocated by the Council of Europe -- no system of equalization transfers is able to ensure economic efficiency. The system has to combine a transfer whose formula is known to local governments, with lump-sum grants.
Keywords: Fiscal equalization, fiscal federalism, public good, tax competition, migration
JEL: H7 - State and Local Government; Intergovernmental Relations: General
H2 - Taxation, Subsidies, and Revenue: General
Manuscript Received : Mar 18 2010 Manuscript Accepted : Mar 18 2010

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