Article thumbnail
Location of Repository

Tradable deficit permits: a way to ensure sub-national fiscal discipline?

By Marie-Laure BreuillĂ©

Abstract

This paper proposes a system of tradable deficit permits for implementing budgetary austerity at the local level. We evaluate the efficiency of the fiscal retrenchment allocation in a dynamic setting with a commitment problem. The way rights are allcated and traded on the market turns out to be decisive for the cost-effectiveness of the system. Indeed, the inability of the State to commit dynamically to a sharing rule of deficit rights generates perverse incentives which affect the local market. The market turns out to be ineffcient - with heterogeneous jurisdictions - unless the State allows local decision-makers to trade permits through time.Policy Coordination, Tradable Permits Market, Soft budget constraint

OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://economix.fr/pdf/dt/2007... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.