Transboundary Pollution, Tax Competition and Redistribution in Federal Systems

posted Nov 21, 2013, 6:39 PM by Adriana M
ABSTRACT:We examine the shape of federal policy making in three different policy scenarios, inwhich regional governments determine regional environmental policies to controlcorrelated transboundary pollutants and the center implements interregionalincome transfers. We examine policy making under horizontal and hierarchicalfederal structures. In a horizontal structure, federal and regional governments makesimultaneous policy choices. In hierarchical structures, federal and regionalgovernments make sequential policy choices. Sequential choices may featurecentralized or decentralized leadership. Our results indicate that hierarchicalfederal structures characterized by decentralized leadership may be sociallysuperior to horizontal and hierarchical federal structures characterized bycentralized leadership.