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Tax Competition Reconsidered

Author

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  • AMRITA DHILLON
  • MYRNA WOODERS
  • BEN ZISSIMOS

Abstract

In a classic model of tax competition, this paper shows that the level of public good provision and taxation in a decentralized equilibrium can be efficient or inefficient with either too much or too little public good provision. The key is whether there exists a unilateral incentive to deviate from the efficient state and, if so, whether this entails raising or lowering taxes. A priori, there is no reason to suppose the incentive is in either one direction or the other.

Suggested Citation

  • Amrita Dhillon & Myrna Wooders & Ben Zissimos, 2007. "Tax Competition Reconsidered," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(3), pages 391-423, June.
    • Handle: RePEc:bla:jpbect:v:9:y:2007:i:3:p:391-423
    DOI: 10.1111/j.1467-9779.2007.00312.x
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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