A Fiscal Federalism Approach to Infrastructure Policy

Charles R. Hulten and Robert M. Schwab, Regional Science and Urban Economics 27(2), 139-159, April .


This paper presents a fiscal federalism perspective on infrastructure policy. It begins by looking at the theory of fiscal federalism and then turns to the actual division of the responsibility for providing public capital in the United States. The paper then argues that it is difficult to square theory and actual practice: a good case can be made that national infrastructure policy is inconsistent with the principles of fiscal federalism in a number of important respects. The final sections of the paper look at two specific issues in federalism, the tax exempt municipal bond market and interjurisdictional competition.

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