Bulletin n. 3/2008
February 2009
CONTENTS
  • Section A) The theory and practise of the federal states and multi-level systems of government
  • Section B) Global governance and international organizations
  • Section C) Regional integration processes
  • Section D) Federalism as a political idea
    • Nobuo Akai, Emilson C. D. Silva
    Interregional redistribution as a cure to the soft budget syndrome in federations
    in International Tax and Public Finance , Volume 16, Number 1 ,  2009 ,  43-58
    The soft budget syndrome is ubiquitous in federations. It emerges whenever a high tier in a fiscal system provides extra resources to a lower tier to prevent the latter from failing to reach a mutually agreeable predetermined target. Interregional income redistribution is also an endemic feature of most federations. We show that the center’s ability of making interregional transfers ex-ante and ex-post cures the soft budget syndrome whenever the center is perfectly informed ex post. Under these circumstances, the interregional transfer scheme makes it a dominant strategy for each regional government to truthfully reveal its privately held information ex-ante.
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