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''Fiscal federalism, discipline and selection adverse in the EU : Lessons from a theoretical model''
( 2005, Vol. 5 No.11 )
What is the optimal wat to stabilize shocks and to take care of fiscal discipline in a fiscal union ? Among the various possible ways, this paper focuses on an inter-countries insurance scheme conditioned by the national preference for the fiscal discipline of each government. We will show that the insurance scheme improves significantly the union's social welfare because it enables to cover deviations of the output gap and correct national preferences.
JEL: E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
H7 - State and Local Government; Intergovernmental Relations: General
Manuscript Received : Aug 05 2005 Manuscript Accepted : Oct 25 2005

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