Many important questions in the field of public finance can be viewed as problems involving public policies in open economies. This paper draws together, from that perspective, a wide range of topics in public economics, emphasizing the implications of resource mobility for our understanding of the efficiency and distributional impacts of public policies. These topics are relevant for the purposes of policy evaluation, political economy, and the broadest questions of governance and of public sector organization at all levels of government, from the purely local to the global.

Technological innovations facilitating e-commerce have had major effects on consumer behavior and firm organization in the retail sector, but the effects of these new transaction technologies on fiscal systems remain unknown. We extend models of commodity tax competition to include multiple types of commodities, trade, and remote commerce, assuming, in accordance with current policy, that e-commerce is taxed at destination while cross-border shopping is taxed at origin. When the cost of online shopping falls, we show that equilibrium tax rates and revenues decrease in large, core jurisdictions but increase in small, peripheral ones, reducing tax differentials. Policy commentators warn that e-commerce erodes tax revenue – true enough for some governments – but, more accurately, changing transaction costs can generate entirely new commercial and fiscal equilibria that ultimately “redistribute” tax revenues from jurisdictions with concentrations of traditional vendors toward others. With some reinterpretation, the model is also adapted to analyze profit-tax competition when firms can respond to high taxes both through profit-shifting and through relocation, each dependent on transactions costs. Changes in technology may again redistribute tax revenues from high-tax to low-tax jurisdictions.

Technological innovations facilitating e-commerce have well-documented effects on consumer behavior and firm organization in the retail sector, but the effects of these new transaction technologies on fiscal systems remain unknown. By extending models of commodity tax competition to include urban spatial structure (agglomeration) and online commerce, one can analyze strategic tax-policy interactions among neighboring localities. Consumers buy different types of commodities, sold either by traditional or by online vendors. When the cost of online shopping falls, we show that equilibrium tax rates and revenues increase in small jurisdictions and decrease in large jurisdictions with retail shopping centers. Policy commentators warn that e-commerce erodes tax revenue - true enough for some localities - but, more accurately, changing transaction costs can generate entirely new commercial and fiscal equilibria that ultimately “redistribute” tax revenues from localities with concentrations of traditional vendors toward other, typically smaller, localities.

As federações amadurecidas apresentam relativa transparência quanto a delimitações de autoridade entre os níveis de governo, os governos subnacionais gozam de uma autonomia considerável em suas políticas de despesas, receitas e dívidas. Em outros países, os problemas de restrições orçamentárias suaves, resgates e instabilidade fiscal e financeira demonstram as dificuldades do desenho institucional de uma federação. Este artigo descreve um quadro analítico no qual os efeitos inter jurisdicionais ou jurisdicionais podem criar incentivos para governos de nível superior para intervir no controle e financiamento de governos de nível inferior ("resgates"). Essa estrutura ajuda a identificar orientações para pesquisas teóricas e empíricas que possam iluminar características importantes das instituições observadas e orientar a análise de políticas.

In metropolitan areas, people are employed in central cities but may reside in suburbs. Through this economic linkage, local property taxes affect neighboring localities within a metropolitan area even when the entire region is small and open with respect to the external markets for freely-mobile labor and capital. Comparative statics analysis shows how one locality can use its property tax to transfer rents from neighbors, giving rise to small-number strategic fiscal interactions among atomistic governments.

Mobility of highly-skilled workers affects and is affected by labor market conditions, taxes, and other policies. This paper documents the demographic and fiscal importance of international migration, especially in aging societies, reviews the efficiency and distributional effects of mobility, and analyzes the economic incidence of fiscal transfers to low-skilled workers that are financed by taxes on imperfectly-mobile high-skilled workers in a dynamic model, distinguishing the short-run, transitional, and long-run gains and losses to contributors and beneficiaries.

• Comments on subnational government counter-cyclical fiscal policies. • Measurement of implicit/explicit subnational debt/deficits and Ricardian equivalence . • Migration and cyclical fluctuations: Dynamic analysis of adjustment is needed.

Interjurisdictional flows of imperfectly-mobile migrants, investment, and other productive resources result in the costly dynamic adjustment of resource stocks. This paper investigates the comparative dynamics of adjustment to changes in local fiscal policy with two imperfectly mobile productive resources. The intertemporal adjustments for both resources depend on complementarity/substitutability in production and the adjustment cost technologies for each, implying that the evaluation of the fiscal treatment of one resource must account for the simultaneous adjustment of both.

Economic regions, such as urban agglomerations, face external demand and price shocks that produce income risk. Workers in large and diversified agglomerations may benefit from reduced wage volatility, while firms may outsource the production of intermediate goods and realize benefits from Chamberlinian externalities. Firms may also protect workers from wage risks through fixed wage contracts. This paper explores the relationships between firms' risks, workers' contracts, and the structure of production in cities.

Acting in the interest of their residents, U.S. states have incentives to impose taxes on the profits of corporations owned by nonresidents, within limits imposed by federal statutes and by the Constitution. This paper presents a model within which a state—using an apportionment formula that includes a sales factor—would choose to tax the income of out-of-state corporations that derive revenues from the sale or licensing of intangible assets to in-state customers, provided that such corporations have sufficient nexus to be taxable. Although such policies enable states to capture rents from nonresidents, they also introduce tax distortions by imposing implicit tariffs on sales by out-of-state firms.

Intergovernmental transfers are a major source of finance to local governments. Overall, they are a surprisingly stable and persistent component of the complex system of intergovernmental regulatory and fiscal relations, even as the responsibilities and powers of subnational governments evolve over time. Transfers facilitate local fiscal adjustment to fiscal shocks arising from natural events such as major storms and floods, from demographic and economic shocks, from judicial decisions, or from statutory changes by higher-level governments. They may also affect local policy tradeoffs between more or less stable revenue sources and expenditure obligations.

We analyze models with inter jurisdictional spillovers among heterogeneous jurisdictions, such as CO2 emissions that affect the global environment. Each jurisdiction's emissions depend upon the local stock of capital, which is inter-jurisdictionally mobile and subject to local taxation. In important cases, decentralized policymaking leads to efficient resource allocation, even in the complete absence of corrective interventions by higher-level governments or coordination of policy through Coasian bargaining. In particular, even when the preferences and production technologies differ among the agents, the decentralized system can result in globally efficient allocation. (JEL D62, H23, H73, H87, Q58)

A review of recent fiscal history can help to understand the mechanisms by which subnational governments adapt their tax, expenditure, and debt policies to an ever-changing economic environment, and on the role of fiscal assistance from higher-level governments in this process. In principle, proposed Federal assistance to states and localities may provide useful macroeconomic stimulus and financial support, but past experience, in the US and elsewhere, highlights the pitfalls in achieving rapid delivery of substantial assistance while simultaneously targeting scarce fiscal resources to the most urgent needs and preserving incentives for prudent financial management by states and localities.

The fiscal consequences of skilled immigration and perceptions thereof are relevant to public attitudes about immigration. This chapter offers a sophisticated analysis of this issue in the wider setting of interactions among fertility, migration, and fiscal policies, drawing together the empirical and theoretical findings from several studies relating especially to western Europe. It emphasizes the fiscal implications of age-imbalanced demographic structures in advanced economies, the impacts of these imbalances on age-sensitive expenditure and revenue systems, and the prospects for fiscal adjustment along demographic, tax, and expenditure policy margins in a global economy characterized by increased competition for mobile capital and labor.

This paper simulates the distributional impact of the Russian personal income tax (PIT) following the flat tax reform of 2001 using data from the Russian Longitudinal Monitoring Survey. I decompose the change in the distribution of net income into a direct (tax) effect and an indirect effect. The indirect effect is further decomposed into evasion and productivity effects using existing estimates of these respective elasticities. As expected, the direct tax effect increased net income inequality. Changes in the pre-tax distribution (indirect effect), on the other hand, had a large negative impact on inequality thus leading to an overall decline in net income inequality. I also find that the tax-induced evasion response increased reported net income inequality while reducing consumption inequality. To the extent that consumption approximates actual income, these results demonstrate that the flat tax reform had a much smaller effect on actual income inequality than on reported income inequality. More importantly, relative to non-tax factor, the reform had little overall effect on income inequality. This suggests that objection to flatter tax schedules on the grounds of income inequality is mostly misguided, especially in transitional countries with high levels of evasion.

This paper presents a general equilibrium analysis of disaster policy in a federation. The national government is postulated to offer optimal disaster relief, a policy that creates moral hazards for subnational government and private sector decisionmakers. In equilibrium, subnational governments, which compete for mobile productive resources, choose inefficiently low amounts of costly disaster avoidance expenditures. This is true even when the national government subsidizes these expenditures through conditional matching grants, implying that national government mandates or direct control over local policy may be required to achieve efficient disaster avoidance. †This paper has been prepared for presentation at a SITE conference on “Federalism and Decentralized Governance”, Stanford University, July 21-22, 2008. An earlier version was written for a conference on “Fiscal Relations and Fiscal Conditions” at Georgia State University, April 20-21, 2006.