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| Author: | Aronsson, T. Wikström, M. |
| Title: | Optimal taxation and risk-sharing arrangements in an economic federation |
| Journal: | Oxford Economic Papers
2003 : JAN, VOL. 55:1, p. 104-120 |
| Index terms: | Economic theory Risk sharing Government Labour supply Fiscal policy Taxation Models |
| Language: | eng |
| Abstract: | This paper analyses optimal taxation and risk-sharing arrangements in an economy with two levels of government. Both levels provide public goods and finance their expenditures through labour income taxation, where the tax base is responsive to the private agents' labour supply decisions. The localities are assumed to experience different random productivity shocks, meaning that the private labour supply decision as well as government's decision problem is then to provide tax revenue sharing btw. the local governments. The optimal degree of revenue sharing depends on whether or not the localities/regions differ with respect to the labour supply incentives. |
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