A theory of distributional conflict, voluntarism and segregation

Ignatius J. Horstmann, Tim Besley, Craig Brett, Stephen Coate, Richard Cornes, Jim Davies, Jim Hines, Carlo Perroni, Al Slivinski, Ron Wintrobe, Kimberley Scharf

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)

Abstract

Along with the rise in income inequality in the US, there is evidence of a simultaneous move towards fiscal devolution and increased government reliance on private provision of public goods. This article argues that these phenomena are related. We describe a model of jurisdiction and policy formation in which the structure of government provision is endogenous and public good provision levels are determined by a political process that can exploit private motives for voluntary giving. The model predicts that an increase in income inequality leads to decentralisation, with local jurisdictions becoming more income-homogeneous than the population as a whole. This reduction in local income heterogeneity, combined with a reduced tax base, results in increased reliance by government on private provision.

Original languageEnglish
Pages (from-to)427-453
Number of pages27
JournalEconomic Journal
Volume118
Issue number527
DOIs
Publication statusPublished - Mar 2008

ASJC Scopus subject areas

  • Economics and Econometrics

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