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Fiscal Federalism in Continuous Time Stochastic Economies
Social Science Research Network
This paper examines the different types of incentives that countries face when deciding to take part in a federal fiscal system. The optimal degree of participation depends on the structural parameters of the economy and on the properties of the federal fiscal system. Firstly, the paper examines the case of federal fiscal systems that work as simple insurance arrangements. Secondly, a mixed insurance and redistribution system is considered. Thirdly, fiscal system participation is added as adoi:10.2139/ssrn.870440 fatcat:iivsfsof5nghjnwa4aqswdcxgq