DP1142 Federal Fiscal Constitutions. Part II: Risk Sharing and Redistribution

Author(s): Torsten Persson, Guido Tabellini
Publication Date: February 1995
Keyword(s): Fiscal Federalism, Redistribution, Voting
JEL(s): D70, H70
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1142

The paper studies the political and economic determinants of inter-regional public transfers. It points to an important difference between two alternative federal fiscal constitutions. The paper shows that inter-regional transfers can be determined either by a federation-wide vote over a centralized social insurance system, or by bargaining over intergovernmental transfers. When regions are asymmetric, the federal social insurance system leads to a larger fiscal programme.