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The Economics of ConflictTheory and Empirical Evidence$
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Karl Wärneryd

Print publication date: 2014

Print ISBN-13: 9780262026895

Published to MIT Press Scholarship Online: September 2014

DOI: 10.7551/mitpress/9780262026895.001.0001

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Fiscal Equalization and Political Conflict

Fiscal Equalization and Political Conflict

(p.23) 2 Fiscal Equalization and Political Conflict
The Economics of Conflict

Maria Cubel

The MIT Press

This chapter analyzes the political viability of fiscal equalization using a model of conflict directly inspired by Esteban and Ray (1999, 2001). It analyzes the circumstances under which one region would be inclined to initiate political conflict when by doing so it would obtain a higher share of resources than under full equalization, and shows how political conflict affects fiscal redistribution across regions and thus sometimes violates the Pigou–Dalton principle.

Keywords:   political viability, political conflict, fiscal equalization, Pigou–Dalton principle, redistribution

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