Abstract
This paper analyses how progressive taxation schemes, implemented by local welfarist government, affect the segregative properties of endogenous jurisdiction formation, using a model where local jurisdictions produce a local public good, financed by a progressive tax on households’ wealth. A jurisdiction is composed of all the households that live in the same place. Local taxation parameters are determined so as to maximize a social welfare function. Households can “vote with their feet”, which means that they can choose to move to the jurisdiction that offers the package “tax - amount of public good” that provides the highest utility level. The main result of this article is the proof that the maximin criterion is more segregative than the utilitarian one. Consequently, it suggests that local governments can not simultaneously struggle against inequalities and segregation.
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Notes
To be perfectly rigorous, we should write “expenditure for the production of the local public good”. However, by integrating a public good production function, increasing with respect to the expenditure for the public good, into the utility function, the results obtained in this article would not be affected.
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Oddou, R. Inequalities and segregation: can welfarist local governments struggle against both simultaneously?. Rev Econ Design 27, 849–866 (2023). https://doi.org/10.1007/s10058-023-00326-w
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DOI: https://doi.org/10.1007/s10058-023-00326-w