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International Tax and Public Finance

, Volume 4, Issue 4, pp 429–451 | Cite as

Centralized vs. Decentralized Redistribution: A Case for Interregional Transfer Mechanisms

  • Andreas Pfingsten
  • Andreas Wagener
Article

Abstract

According to conventional wisdom, Musgrave's “RedistributionBranch” should be assigned to the central level of governmentin a federation. Otherwise, fiscal externalities created by themobility of the poor would render decentralized redistributioninefficient, if not impossible. The paper objects to this viewand argues that decentralized intraregional redistribution canyield efficient outcomes if it is combined with cleverly designedinterregional transfer mechanisms. Within a general frameworkwe give necessary and sufficient conditions for interregionaltransfer schemes to implement efficient allocations as Nash equilibriaof a decentralized redistribution game.

Decentralization Redistribution Fiscal Federalism Public Funds Sharing 

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Copyright information

© Kluwer Academic Publishers 1997

Authors and Affiliations

  • Andreas Pfingsten
    • 1
  • Andreas Wagener
    • 2
  1. 1.Institut fuer KreditwesenUniversity of MuensterMuensterGermany
  2. 2.Department of EconomicsUniversity of SiegenSiegenGermany

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