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Theoretical and Applied Economics
No. 6 / 2007 (511)

Fiscal Federalism

Tatiana Mosteanu
Mihaela Iacob
Academia de Studii Economice, Bucuresti

Abstract. The central budget of a country collects only a fraction of the total fiscal revenues and executes only o fraction of the national public expenditures, the rest of the revenues and expenditures becoming the responsability of subnational governments. The economist Charles Tiebout developed a theoretical model which although makes an imperfect description of the reality, shows that people’s mobility is being influenced by tax rates and the amount of state/local expenditures. Thus, he suggests that the degree of responsibility that can be appointed to the local budgets should subscribe to the tax – benefits ratio, the extend of the positive externalities and the scale economies of public goods. Also, the issue of revenues distribution among communities is being raised, being identified three kinds of grants used by the public authorities: matching grants, block grants and conditional block grants. In the concept of fiscal federalism there can be found a limited analogy between national public finance theory and international public finance theory, with the international taxation as the pivotal element.

Keywords: optimal fiscal federalism; the Tiebout Model; intergovernmental grants; international taxation.

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Marin Dinu

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The Economicity. The Epistemic Landscape, Marin Dinu, 2016


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