A Theory of Distributional Conflict, Voluntarism and Segregation

Kimberley Scharf and Ignatius Horstmann

No 3625, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Along with the rise in income inequality in the US, there is evidence of a simultaneous move toward fiscal devolution and increased government reliance on private provision of public goods. This Paper argues that these phenomena are related. We describe a model of jurisdiction and policy formation in which the structure of government provision is endogenous and public good provision levels are determined by a political process that can exploit private motives for voluntary giving. The model predicts that an increase in income inequality leads to decentralization, with local jurisdictions becoming more income-homogeneous than the population as a whole. This reduction in local income heterogeneity, combined with a reduced tax base, results in increased reliance by government on private provision.

Keywords: Fiscal federalism; Private provision of public goods; Jurisdiction formation (search for similar items in EconPapers)
JEL-codes: H20 H70 (search for similar items in EconPapers)
Date: 2002-11
New Economics Papers: this item is included in nep-geo
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Citations: View citations in EconPapers (6)

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Journal Article: A Theory of Distributional Conflict, Voluntarism and Segregation (2008)
Journal Article: A Theory of Distributional Conflict, Voluntarism and Segregation (2008)
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