Endogenous Leadership in a Federal Transfer Game

MPRA Paper from University Library of Munich, Germany

Abstract: The paper explores the issue of leadership in central transfer within a federation. In a federal country, provinces, in anticipation of the ultimate federal bailout, may spend more than what is optimal. Such behaviour creates negative fiscal externalities and harms the central government. To counter such tendencies, it is suggested by policymakers that central authority should always be a first mover in the transfer game: once the grant (presumably formulaic) is dispensed, it should refrain from any ex post transfer. In spite of such recommendations, central governments, in almost all countries, chooses to be the second mover from time to time. We explore the conditions, other than the familiar political economy arguments, under which the central government optimally chooses to be the second mover. The key determinants of the first or second mover advantages in such situations is the nature of spillover effects of public goods between the two tiers of government

Keywords: Federalism; Transfer Game; First and Second Mover Advantages (search for similar items in EconPapers)
JEL-codes: H77 (search for similar items in EconPapers)
Date: 2016-06-09
New Economics Papers: this item is included in nep-pol and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/71882/1/MPRA_paper_71882.pdf original version (application/pdf)

Related works:
Working Paper: Endogenous Leadership in a Federal Transfer Game (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:71882

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().