Some Evidence on the Effect of the Separation of Spending and Taxing Decisions

Bibliographic Data

ID10181397
AuthorsStanley L Winer (0000-0001-9128-0797, corresponding author)
Year1983
Volume91
Issue1
Pages126-140
Publication date1983-02-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueJournal of Political Economy (JOURNAL)
Journal identifiersISSN: 0022-3808 • E-ISSN: 1537-534X
PublisherUniversity of Chicago Press (PUBLISHER • US)
DOI10.1086/261131
OpenAlexW2149779099
LanguageEN
Citations received29
References cited8

It is often argued that separation of public spending and taxing decisions engenders in the voter overoptimistic hopes that someone else will bear the cost of public services, thereby inducing an increase in the size of government. But are perceived tax prices systematically and persistently reduced by separation? Although in stock markets all agents' expectations may be unbiased, they may or may not be unbiased in political markets. This paper analyzes the separation created in federal states when the central government finances local expenditures. Evidence from a dynamic decisive-voter model is presented that indicates that the separation introduced by federal grants to Canadian provinces did in fact reduce the perceived tax price of provincial public services and raise provincial expenditures. The results suggest also that the effect of separation diminished over time

Economics · Government (linguistics · Government spending · Market economy · Monetary economics · Political science · Politics · Public economics · Public spending · Separation (statistics · Stock (firearms · Welfare · Fiscal Policy and Economic Growth · Gender, Labor, and Family Dynamics · Law · Politics, Economics, and Education Policy

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