Fiscal Equalization with Hidden Information and Hidden Action

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Kirn, T. (2014, 15.05.-16.05.2014). Fiscal Equalization with Hidden Information and Hidden Action. Reforming Public Service Delivery, L'Université de Lausanne.

Publication type

Lecture / Presentation


This paper studies the local tax policy setting behavior within a federal system under hidden information and hidden action by considering the incentive effects arising from elections and yardstick competition. It differsfrom earlier contributions by combining auction theory with a modern approach of fiscal federalism, based on agency theory. In this framework serves the yardstick competition as baseline model that leads to a Pareto efficient outcome, despite private information about the costs of service provision and rent-seeking activities of local policy makers. However, a first best solution is missed, if the local governments behave non-myopic. Despite this are both results from the perspective of principals (central level, local electorate) more advantageous than the outcome of a singular yardstick competition, which is in this comparison only third-best.


Microsimulation und Model Development
Auftragsforschung, since June 2009

Content of this project is the ongoing development of the Liechtenstein micro-simulation models. There are two basic models: microLIE: PIT is the model of the personal income tax system and microLIE: ... more ...


Organizational Units

  • Institute for Financial Services
  • Chair for Tax Management and the Laws of Liechtenstein and International Taxation