Tepper School of Business
Carnegie Mellon University
Posner Hall, Room 243
Pittsburgh, PA 15213
Institutional Affiliation: Carnegie Mellon University
NBER Working Papers and Publications
|September 2018||Majority Choice of Taxation and Redistribution in a Federation|
with Dennis Epple, Richard Romano: w25099
We provide a model with a federal government and multiple local governments, the former with power to levy an income tax for redistribution, and the latter choosing a local income tax, property tax, lump-sum tax or subsidy, and a local public good. Policy is set by majority choice at each tier of government by households that differ by income and ability to move across communities. We provide sufficient conditions for existence of equilibrium and examine its properties. Central findings are federal income distribution, little local redistribution, and local preference for property taxation over income taxation to fund local public goods.
|June 2015||Majority Choice of Tax Systems in Single- and Multi-Jurisdictional Economies|
with Dennis Epple, Richard Romano: w21231
We examine majority choice of tax instruments in single- and multi-jurisdictional economies with heterogeneous households. In our framework majority voting equilibrium exists despite the multidimensional policy choice set. We identify five competing incentives that influence choice of tax instruments. Equilibria generally entail a mixture of tax types. With multiple jurisdictions, strong reliance on head taxation in rich communities arises to deter poorer households from immigrating. Mobility fundamentally affects the equilibrium tax system with redistribution incentives dominating choice of instruments when mobility is limited. Limiting or eliminating head taxation fundamentally alters stratification, public good provision levels, and tax systems.
Published: Calabrese, Stephen & Epple, Dennis & Romano, Richard, 2015. "Majority choice of tax systems in single- and multi-jurisdictional economies," Journal of Public Economics, Elsevier, vol. 131(C), pages 58-70. citation courtesy of
|July 2011||Inefficiencies from Metropolitan Political and Fiscal Decentralization: Failures of Tiebout Competition|
with Dennis N. Epple, Richard Romano: w17251
We examine the welfare effects of provision of local public goods in an empirically relevant setting using a multi-community model with mobile and heterogeneous households, and with flexible housing supplies. We characterize the first-best allocation and show efficiency can be implemented with decentralization using head taxes. We calibrate the model and compare welfare in property-tax equilibria, both decentralized and centralized, to the efficient allocation. Inefficiencies with decentralization and property taxation are large, dissipating most if not all the potential welfare gains that efficient decentralization could achieve. In property tax equilibrium centralization is frequently more efficient! An externality in community choice underlies the failure to achieve efficiency with...
Published: Stephen M. Calabrese & Dennis N. Epple & Richard E. Romano, 2012. "Inefficiencies from Metropolitan Political and Fiscal Decentralization: Failures of Tiebout Competition," Review of Economic Studies, Oxford University Press, vol. 79(3), pages 1081-1111. citation courtesy of
|October 2005||Local Public Good Provision: Voting, Peer Effects, and Mobility|
with Dennis Epple, Thomas Romer, Holger Sieg: w11720
Few empirical strategies have been developed that investigate public provision under majority rule while taking explicit account of the constraints implied by mobility of households. The goal of this paper is to improve our understanding of voting in local communities when neighborhood quality depends on peer or neighborhood effects. We develop a new empirical approach which allows us to impose all restrictions that arise from locational equilibrium models with myopic voting simultaneously on the data generating process. We can then analyze how close myopic models come in replicating the main regularities about expenditures, taxes, sorting by income and housing observed in the data. We find that a myopic voting model that incorporates peer effects fits all dimensions of the data reason...
Published: Calabrese, Stephen, Dennis Epple, Thomas Romer and Holger Sieg. "Local Public Good Provision: Voting, Peer Effects, And Mobility," Journal of Public Economics, 2006, v90(6-7,Aug), 959-981. citation courtesy of