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Public Finance Review, Vol. 34, No. 6, 607-636 (2006)
DOI: 10.1177/1091142106291501

Public Choice of Tax and Regulatory Instruments—The Role of Heterogeneity

Evidence from U.S. State Environmental Policy, 1980-1994

Dong (Dan) Lee

California State University, Fullerton

Thomas E. Borcherding

Claremont Graduate University, California

In the authors' political equilibrium model, regulation is considered an implicit and regressive tax-equivalent alternative to the common and less regressive fiscal alternatives: income, property, and sales taxes. The authors hypothesize that in more heterogeneous jurisdictions the state relies more on regulation and less on budgetary spending than in more homogeneous units. Using data drawn from U.S. state-level environmental policy from 1980 to 1994, the authors confirm this hypothesis.

Key Words: size of government • taxation • public spending • fiscal and regulatory choice • environmental regulation

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This Article
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