Blockchain Papers

Sławomir Franek, Katarzyna Wójtowicz, Dorota Wyszkowska

No abstract is available for this record.

Craig S Wright

This online appendix accompanies the main paper of the same title. It contains thefull proofs of the propositions stated in the main paper, the multi-regime Jacobian andbifurcation analysis, the notation table, and the code-and-data documentation for theempirical execution. Section and equation references that appear in this document referto the main paper unless explicitly prefixed by OA-.

Bin Zhang

This paper addresses the fundamental challenge of public goods provision-the Samuelsonian Dilemma-by proposing a decentralized mechanism termed Citizen's Executive Right (CER). Unlike traditional central-planning models, the CER mechanism endows agents with dispositional authority over tax revenues via Personal Public Accounts (PPAs). We introduce Temporal Scarcity-enforced by a "Rule of Lapsing"-as an information-forcing operator that collapses strategic delay into discrete preference signals. Our theoretical contributions are threefold: 1. Incentive Compatibility: We prove that under loss aversion, the mechanism achieves a symmetric Perfect Bayesian Equilibrium that is "detail-free" (Wilson Doctrine). 2. The Extended Walras's Law: We derive an identity showing that the clearing of the public sphere, measured by the Total Lapsing Rate ($\Lambda_t$), is a sufficient condition for general equilibrium. 3. Dynamic Stability: Using the Routh-Hurwitz criteria, we demonstrate that the balanced equilibrium is locally asymptotically stable, where the temporal pressure acts as a feedback operator. Our results suggest that institutionalizing time-limited dispositional rights can resolve the structural void in public finance, providing a robust blueprint for market-based public governance.

Tom Barbereau, Reilly Smethurst, Orestis Papageorgiou, Alexander Rieger · 5 authors

Bitcoin and Ethereum are frequently promoted as decentralized, but developers and academics question their actual decentralization. This motivates further experiments with public permissionless blockchains to achieve decentralization along technical, economic, and political lines. The distribution of tokenized voting rights aims for political decentralization. Tokenized voting rights achieved notoriety within the nascent field of decentralized finance (DeFi) in 2020. As an alternative to centralized crypto-asset exchanges and lending platforms (owned by companies like Coinbase and Celsius), DeFi developers typically create non-custodial projects that are not majority-owned or managed by legal entities. Holders of tokenized voting rights can instead govern DeFi projects. To scrutinize DeFi’s distributed governance strategies, we conducted a multiple-case study of non-custodial, Ethereum-based DeFi projects: Uniswap, Maker, SushiSwap, Yearn Finance, and UMA. Our findings are novel and surprising: quantitative evaluations of DeFi’s distributed governance strategies reveal a failure to achieve political decentralization.

Santiago Pinto

It is well-known that competition for factors of production, including competition for residents, affects the public services provided in the communities. This paper considers the determination of local investment in urban transport systems. Many specialists question the effectiveness of the current U.S. top-to-bottom transportation institutional arrangement in which the federal government plays a dominant role and recommend a shift toward a decentralized organization. We examine how such a shift would affect the levels of transport investment. Specifically, we consider a model of two cities, and assume, as in Brueckner and Selod (2006), that transport systems are characterized by different time and money costs. We compare the outcomes reached when the transport system is decided by a central authority (a state or federal government) to the one decided by each jurisdiction in a decentralized way. In the latter case, city or local transportation authorities choose the system that maximizes residents? welfare, taking as given the decisions made elsewhere, essentially competing for residents (or workers). Our analysis shows that even though a shift toward a decentralized arrangement of the transportation system would generally lead to overinvestment (relative to the centralized case), the extent of this bias depends on the specific factors that drive transport authorities in deciding the transportation system, on the landownership structure, and on the financing arrangements in place. The paper also shows that, in a more general setup, when the two cities differ in their productivity levels, the more productive city will tend to overinvest in transportation systems that connect the two cities, and the less productive city will tend to underinvest in those systems.

Jan K. Brueckner

This paper shows that the inefficiency of fiscal decentralization in the presence of spillovers, a main tenet of the decentralization literature, is overturned in a particular transportation context. In a monocentric city where road (bridge) capacity is financed by budget-balancing user fees, decentralized capacity choices (made by individual zones within the city) generate the social optimum despite the presence of spillovers. Optimality also requires the correct population distribution across the city's zones, conditional on bridge capacities. This outcome is achieved because the user fees function as optimal congestion tolls, a result that follows from the famous self-financing theorem of transportation economics.

Antonio Bellofatto

This dissertation contains three chapters and focuses on the optimal design of fiscal policy, both from a theoretical and from a quantitative perspective. In the first chapter, “Wealth Taxation and Life Expectancy,” I address the optimal taxation of wealth in a class of dynastic overlapping-generations economies with heterogeneous mortality risk. Working individuals are indexed by skills which are private information. Skills not only determine earning abilities but also correlate with survival probability, so that more productive agents on average live longer. The analysis distinguishes between the tax treatment of two possible sources of wealth, namely, savings and bequests, and points to the mortality gradient as a crucial determinant for optimal wealth taxation. Specifically, due to differential mortality: (a) earned wealth should be marginally taxed, (b) transferred wealth via bequests should be marginally subsidized, and (c) marginal tax schedules on bequests and inter-vivos transfers should be separated. I calibrate the model to U.S. data and quantitatively evaluate its tax implications. For the median worker, mortality differences create a force for marginally taxing capital mortality differences create a force for marginally taxing savings by up to 1.7%, and for marginally subsidizing bequests by as much as 3.4%. These figures are robust to the value of the societal intergenerational discount factor and can yield significant welfare gains. In the second chapter, “Taxing Atlas: Using Firm Data to Derive Optimal Income Tax Rates” (joint with Laurence Ales and Jessie J. Wang), we analyze the optimal taxation of top labor incomes. Top income earners are modeled as managers who are heterogeneous across skills and operate a span-of-control technology, as in Rosen (1982). Managers privately observe their skill level, which increases the productivity of both effort and supervision, thus creating a scale-of-operations effect. We characterize optimal taxes in this environment and identify novel determinants linked to firm technology. Our main result is that to be consistent with U.S. firm data, the optimal top income tax rate should be roughly in line with the U.S. tax code, in contrast to previous results in the literature. In the third chapter, “Regional State Capacity and the Optimal Degree of Fiscal Decentralization” (joint with Martín Besfamille), we study the optimal degree of fiscal decentralization in a federation. In our environment, regional governments are characterized by two dimensions of state capacity; namely, administrative and fiscal. These gauge the ability to deliver public goods and to raise tax revenues, respectively. Two regimes are compared: partial and full decentralization. Under partial decentralization, regional governments have no tax powers and rely on central bailouts to refinance incomplete projects. Under full decentralization, regional governments refinance incomplete projects through capital taxes, in a context of tax competition. We show how the optimal degree of fiscal decentralization hinges on the relative magnitudes of each type of capacity. Specifically, for sufficiently low levels of fiscal capacity, bailing out regional governments is optimal regardless of the level of administrative ability. However, a combination of low levels of administrative capacity and high levels of fiscal capacity calls for fully decentralizing tax powers.

Barbara Majovská

The purpose of my thesis is to analyse the tools and consequences of the fiscal federalism in Spain. Decentralization process has started along with democratization since passing new Constitution in 1978. It has been mainly reaction to cultural, historical and political reasons of creation of Autonomous Communities. Economic crisis stroke the Spanish economy very strongly and has been a challenge for the whole financing model. Thus, the main aim of my thesis is to deal with the recent development of the financing model. Since Spain is a member of the European Union, I describe also tools of the fiscal federalism put forward by the European Union. Spain is considered to be one of the most decentralized countries in Europe. In my thesis I want to prove that further decentralization has been confirmed by reforms responding to the economic crisis. Then, I want to show that used tools of fiscal federalism are profitable for both state and autonomous communities and positively affect economy of Spain and that they has helped to deal with economic crisis. Finally, I want to show that Spain is getting closer to federal arrangement of government. As has been proved, decentralization is still prevailing tendency in financing model of autonomous communities. But central government has been proposing...

Salvatore Ercolano

Over the last years, scholars looked at the decentralization of competences as a possible solution for several issue of public finance. Despite the development of a new branch in fiscal federalism theory (the so-called Second Generation Theory), the homogeneity of preferences at local level still represents one of the main assumption in this literature. This hypothesis allows assuming that a local allocation of public services minimizes the welfare losses that a central allocation could generate. The present contribution tries to underline how the homogeneity of preferences continues to represent a central topic in fiscal federalism theory, finding in the information issue a kind of trait d'union between them. Moreover, by means of an empirical analysis on the Italian case, we will try to analyze if individual attitudes towards a public management of local ser- vices present a greater heterogeneity at macroregional (NUTS1) or regional (NUTS2) level.

Bruno De Borger, Stef Proost

This paper studies the political economy of pricing and investment for excludable and congestible public goods in a federal state. Currently, we observe a wide variety of practices, ranging from federal gasoline taxes and road investment to the local supply of -- and sometimes free access to -- libraries, parking spaces and public swimming pools. The two-region model we develop allows for spill-overs between regions, it takes into account congestion, and it captures both heterogeneity between and within regions. Regional decisions are taken by majority voting; decisions at the federal level are taken either according to the principle of a minimum winning coalition or through cooperative bargaining. We have the following results. First, when users form the majority in at least one region, decentralized decision making performs certainly better than centralized decision making if spill-overs are not too large. Centralized decisions may yield higher welfare than decentralization only if users have a large majority and the infrastructure in a given region is intensively used by both local and outside users. Second, if non-users form a majority in both regions, centralized and decentralized decision making yield the same socially undesirable outcome, with prices that are much too high. Third, both bargaining and imposing uniform price restrictions across regions improve the performance of centralized decisions. Fourth, the performance of decentralized supply is strongly enhanced by local self-financing rules; it prevents potential exploitation of users within regions. Self-financing rules at the central level are not necessarily welfare-improving. Finally, the results of this paper contribute to a better understanding of actual policy-making.

Jan K. Brueckner

This paper shows that the inefficiency of fiscal decentralization in the presence of spillovers, a main tenet of the decentralization literature, is overturned in a particular transportation context. In a monocentric city where road (bridge) capacity is financed by budget-balancing user fees, decentralized capacity choices (made by individual zones within the city) generate the social optimum despite the presence of spillovers. This conclusion is closely tied to the famous self-financing theorem of transporation economics.

Jan K. Brueckner

No abstract is available for this record.

Arantza Gorostiaga, Jana Hromcová, Miguel-Ángel López-García

No abstract is available for this record.

Clemens Fuest, Martin Kolmar

No abstract is available for this record.

Clément Carbonnier

This article presents a model of optimal decentralization of economic governance. It focuses on the provision of public input for private production. It considers that the decision power is given to a local government if it has the full right to decide new investments and new taxes to finance it. Three economic forces act on this optimal decentralization of the decision. First is the centripetal force which consists in the increasing accuracy and relevance of public investments when decided more locally. The second and third are the centrifugal forces of the administrative costs on the one hand and of the fiscal competition among decentralized jurisdictions on the other. Formal proofs of the existence and uniqueness of solutions are given under special hypotheses and in general. Numerical analysis is also done to understand the impact on the optimal decentralization level of the different model parameters.

Monisankar Bishnu, Chetan Ghate, Pawan Gopalakrishnan

We construct a model of endogenous investment specific techological change in which the stock of public capital influences the real price of capital goods. We show that the growth and welfare maximizing tax rates coincide in the planned economy. When factor income taxes finance public investment infintely many tax-subsidy combinations can decentralize the planner's allocations. The optimal capital income tax can be positive in this environment. We then augment the model to incorporate administrative costs. A unique combination of factor income taxes now decentralizes the planner's allocations. A simple calibration exercise suggests that changes in factor income taxes does not cause a significant change in the optimal growth rate or welfare. Our framework broadens the environment in which investment specific technological change occurs, and characterizes the role of optimal factor income taxation in raising long run growth and welfare.

Anton Korinek

No abstract is available for this record.

Dirk Niepelt, Martín Gonzalez-Eiras

We develop a dynamic politico-economic model of public investment where decisions can be made at several levels of government: federal, state, or county. The model predicts that in the absence of internal mobility, the higher level of government would fund all investments that present positive externalities not fully internalized at lower levels. But when there are important internal migrations unrelated to fiscal policy, investments that are embodied - and therefore are useful to citizens if they move to other jurisdictions, like education - are more likely to be funded at the local level than investments that are physically sunk, as infrastructure. Such pattern of migrations and financing is consistent with U.S. data.

Benjamin Lünenbürger

River floods can be very damaging. Since numerous human responses to floods are possible, the question arises: What is the organization of flood management that leads to the most efficient results? The dissertation first considers flooding and flood management in Germany. Based on that analysis, a theoretical, political-economy model of public flood defense is developed. The basic model is then extended to allow migration between upstream and downstream regions as well as between flood-prone areas and zones without risk. As different flood protection measures have quite different spatial characteristics, the distribution of responsibilities between the different actors is decisive for the overall performance of flood management. The distribution of public responsibilities among the different federal actors is crucial for two reasons. First, there are unidirectional upstream-downstream spillovers that raise the question whether decentralized or centralized provision of public goods is more efficient. Second, benefits from flood protection are concentrated to flood-prone areas near rivers. This concentration creates a natural heterogeneity of preferences for flood defense. These two aspects are also relevant for other issues in water management. Unidirectional spillovers and spatially heterogeneous preferences for public goods challenge the federal organization of flood defense. Following the lead of recent political-economy contributions to fiscal federalism, both aspects are investigated in a two region model with majority voting. Four different decision-making structures are compared: classical decentralization or centralization (based on jurisdictions containing voters both with and without preferences for the public good) and decentralized or centralized single issue authorities (whose jurisdictions, by definition, contain only high preference voters). Decentralized jurisdictions separate upstream and downstream voters, whereas a centralized jurisdiction comprises both groups. It turns out that centralized jurisdictions lead to a very low public good surplus and that either classical decentralization or decentralized single issue authorities achieve the best results under most conditions. The centralized provision of public goods is flawed because there is either an extreme over- or an extreme under-provision of the downstream public good. This can, however, be mitigated if there is a common standard for flood protection or if only the upstream provision of the public good is centralized. Whether or not these two solutions are beneficial depends on the magnitude of spillovers and also on the voting majorities in the two regions. Expanding the model to consider migration led to more complex results. First, citizens can migrate to flood-prone areas. Such migration flows can be induced by too large public flood defense, which is favored if citizens outside of flood-prone areas also finance the public good. Second, migration flow is also influenced by spillovers. The socially efficient population distribution is U-shaped with respect to spillovers. With symmetry assumptions, negative as well as positive unidirectional spillovers favour larger downstream populations. With myopic voters that neglect migration flow, this pattern is not achieved and the downstream population is large for positive spillovers and small for negative spillovers. Centralized jurisdictions are preferable to decentralized ones for smaller spillover effects if migration is possible. This argument is even stronger if voters take migration responses to the provision of public goods into account. The results shed light not only on the federal organization of flood management, but also on the institutional difficulties that arise from the current policy paradigm of the river basin approach to water management.

Sara Biancini

We consider the regulation of national firms in a common market. Regulators can influence the production of national firms but they incur in a positive cost of public funds. First, we show that market integration is welfare improving if and only if the efficiency gains compensate for the negative public finance effect (related to business stealing). We also show that supranational competition can have very different consequences on the rent seeking behaviour of firms, depending on cost correlation and ex-ante technological risk. Finally, we characterize the global optimum and show how it can be sustained in a decentralized bargaining solution.

Massimo Giannini

This paper develops a two‐period overlapping generations model with heterogeneous agents aiming at analysing how decentralization in the provision of public education affects growth and personal inequality via human capital investment. Education is financed by a tax levied by either national or local authorities. The tax rate is chosen according to a median voter mechanism. During their working period of life, individuals look after their offspring by providing them with a high level of school education stemming from taxation. In addition parent's contributions to the social security system provide them with retirement income. Heterogeneity accounts for the differences in the optimal taxation mechanism, linking the income distribution to the tax rate, and hence to human capital accumulation, growth and income inequality. In this way we relate differences among agents to the tax rate. We show that decentralization induces growth rate disparities among local communities but it can be ruled out by a proper fiscal substitution between social security and locally provided education. Unlike in the literature, this type of fiscal design allows local economies to grow faster and more equally than the national design.

Oliver Koppel

No abstract is available for this record.

Jaakko Kiander, Juha Kilponen, Jouko Vilmunen

No abstract is available for this record.

Lars P. Feld, Horst Zimmermann, Thomas Döring

The distribution of competencies between the different levels of a federal system may have remarkable effects on economic growth, because mainly the regions of a country contribute to national economic development. Thus, a government’s economic policy is reasonably shaped along regional lines. The theoretical discussion in economics focuses however on the efficiency aspects of a decentralized provision and financing of public services; rarely the argument is raised that decentralization or federalism increases growth through a higher ability of the political system to innovate and to carry out reforms. After a discussion of the theoretical arguments on federalism and growth, we address the empirical question in this paper how important the assignment of decision making competencies and the design of fiscal federalism are for economic development. Finally, on the basis of existing theoretical and empirical studies on economic growth and federalism, open questions and possible ways of answering them are presented.