Journal of Risk & Control

Public Health Federalism?

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• Abstract

  This paper develops a general equilibrium model of competitive jurisdictional choice that provides insights into what is being coined 'public health federalism'.  Using a standard neoclassical model of production combined with a utility maximization hypothesis, jurisdictions choose both tax rates and a level of local public health quality. Incorporating the joint determination of both tax decisions and the choice of public health standards can give rise to some interesting interrelationships between local tax revenues and public health considerations.  Additionally, the model is extended to address the fiscal realities of sub-state jurisdictions in the United States. Beleaguered in a second-best setting, devolved efficiency becomes a target difficult to hit. We show that when jurisdictions rely on taxing mobile factors and mobile factor productivity is enhanced by relaxing public health mitigation, jurisdictions will choose lower levels of public health quality.

  JEL classification numbers: H73, I18, R13.

  Keywords: Federalism, Decentralized authority, COVID - 19, Public health mandates.