Local public goods, inter-regional transfers and private information

被引:18
作者
Cornes, RC
Silva, ECD
机构
[1] Univ Nottingham, Sch Econ, Nottingham NG7 2RD, England
[2] Tulane Univ, Dept Econ, New Orleans, LA 70118 USA
关键词
asymmetric information; public goods; fiscal federalism;
D O I
10.1016/S0014-2921(01)00142-8
中图分类号
F [经济];
学科分类号
02 ;
摘要
Suppose that the centre wishes to make transfers between member states of a federation to reduce inequality. However, it lacks precise information concerning the cost differences that are responsible for the initial income inequality. We examine the implications of asymmetric information for the design of the transfer scheme. We show that if member states' inherent cost levels as local public good providers take discrete values, the first best, or 'complete information', transfer scheme may or may not violate incentive compatibility. If inherent cost is a continuous random variable, such a scheme certainly violates incentive compatibility. We also explore the possibility of binding participation constraints. In our model, a binding incentive compatibility constraint leads to a reduction in effort devoted to cost reduction, and a binding participation constraint will also lead to a violation of Samuelson's optimality condition for public good provision. (C) 2002 Elsevier Science B.V. All rights reserved.
引用
收藏
页码:329 / 356
页数:28
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