The Economics of Federalism

by

Business Finance

(Part 1)

Overall, property taxes constitute a small piece of the macroeconomic pie in industrialized countries, but they are an important source of revenue for local governments. To what extent do local governments rely on property taxes? To what is property tax revenue allocated? How have voters resisted increasing property taxes, and to what end? See The U.S. Property Tax Revolt as a point of departure (in Stiglitz and Rosengard, 2015, pp. 834-835).

(Part 2)

There is an age-old tension between states/localities and the federal government, in regard to which level of government provides public goods more efficiently. Define what is meant by efficient in the context of allocating public goods. Explain the Tiebout hypothesis. What are the limitations of the hypothesis (i.e., factors that many complicate the efficient allocation of public goods)? Describe them. Should public goods be provided by state/local or the national government? Justify your position.

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