Theory of Public Finance in a Federal State

By Dietmar Wellisch | Go to book overview

CHAPTER 9
Decentralization and
Intergenerational Problems

This chapter studies whether a decentralization of certain government functions can better protect the interests of future generations than a central responsibility. It concentrates on two areas of government activities-environmental and public debt policies. According to orthodox neoclassical reasoning, public debt policies and the control over long-lived pollutants are related by the joint problem of intergenerational externalities. Currently living generations extend their consumption at the expense of their descendants, since they tend to ignore the costs which their descendants must bear without being asked to do so. Longlived pollutants and debt differ only in that the former results in technological externalities and the latter in fiscal externalities.1 However, owing to this difference, each issue must be treated analytically as a separate problem.

An implicit and rarely recognized assumption of the externality problem is that future generations cannot escape the undue burden: they cannot emigrate because the economy is assumed to be closed. The purpose of this chapter is instead to allow for migration and to analyze the externality problem from the perspective of regional economics. Emissions will only harm the local environment and debt will always refer to the local jurisdiction. Regions are small and households are perfectly mobile. Households live for two periods. They are mobile when young and stick to their locational choice when old.2 The basic question then arises: Do regional authorities have any incentive to internalize intergenerational externalities caused by the emission of long-lived pollutants and by local public debt? In other words, are regional governments better qualified to take the interests of future generations into account than their national counterpart?

____________________
1
One of the most prominent critics of the orthodox neoclassical view of public debt is Barro (1974). That people make bequests is interpreted by him as evidence for operative altruism. Altruistic parents anticipate that public debt simply results in shifting tax payments to their children; parents will find it optimal to neutralize any income effect by increasing bequests.
2
Empirical studies by Topel (1986) and La Londe and Topel (1991) confirm the view that the degree of household mobility is age-dependent. Old households are less mobile than young households.

-152-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
Theory of Public Finance in a Federal State
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
/ 214

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.