公共政策经济分析Chap20 Public Finance in a Federal System.ppt

Chapter 20 – Public Finance in a Federal System Introduction This lesson will address questions related to different levels of government: How should various responsibilities be allocated to different levels of government? Is decentralized government decision making desirable? Are locally raised taxes a good way to pay for services provided locally? Background A federal system consists of different levels of government that provide public goods and services, and have some scope for making decisions. Fiscal federalism explores roles of different levels of government, and how they relate to one another. Background The centralization ratio measures the proportion of total direct government expenditures made by the central government. See Table 20.1 Incorrectly measures power if state and local governments are mandated to spend money on certain programs. Table 20.1 Background A number of activities are primarily run at the state- and local-level. Education Public safety Highways Public welfare Community Formation Think of communities as a club – a voluntary association of people who band together to share some kind of benefit. Community Formation Public park example Members of the club have identical tastes Can costlessly exclude nonmembers Will share equally the use of park and costs of park within the club Community Formation For a park of a given size, the larger the club, the smaller the costs per person. As more people join the club, congestion costs rise. Community should expand membership until: Marginal decrease in membership fee equals the marginal increase in congestion costs Community Formation For a community of a given size, how large should the park be? Larger park yields greater benefits, but at a diminishing rate. Community should expand park size until: Each member’s marginal benefit just equals the per-member marginal cost. Community Formation Putting these two together: The optimal community is one in which the number of members and level of services