Subsidies and in-kind transfers give rise to negative fiscal externalities. However, internalizing negative fiscal externalities through taxation would undo the subsidy or in-kind transfer that caused them. Similarly, positive fiscal externalities cannot be internalized though government subsidies. This paper describes a mechanism that transfers fiscal externalities from the government to private parties. Such transfers generate incentives within the private sector to reduce inefficiencies caused by fiscal externalities. Thus, the paper offers a straightforward, but powerful, insight: transferring fiscal externalities to third parties extends the reach of the Coase Theorem to inefficiencies stemming from fiscal externalities.
| Building: | Ross School of Business |
|---|---|
| Website: | |
| Event Type: | Workshop / Seminar |
| Tags: | Economics, Public Finance, seminar |
| Source: | Happening @ Michigan from Department of Economics, Public Finance, Department of Economics Seminars |
