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Tax Competition Between Regional Governments And National And Interregional Economic Growth

Author

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  • Wei-Bin Zhang

    (Ritsumeikan Asia Pacific University, Beppu, Japan)

Abstract

The purpose of this study is to examine a well-mentioned but rarely properly examined issue related to interregional tax competition and regional and national economic growth. We build an inter-regional neoclassical economic growth with regional governments’ competition in taxation. We extend Solow-Uzawa’s neoclassical growth model to any number of regions. The model treats wealth/capital accumulation, economic structures, factor distributions, interregional population distribution, amenity, regions’ tax rates as endogenous variables. Firms’ behavior is described by profit maximization, households’ behavior by utility maximization, markets by perfect competition, and regional governments’ behavior by choosing tax rates to maximize utility. We identify the existence of an equilibrium point and conduct comparative analysis to show how changes in, for instance, the utility elasticity of public goods, technologies, propensity to consume housing, and propensity to save, affect the long-run economic growth and structure.

Suggested Citation

  • Wei-Bin Zhang, 2019. "Tax Competition Between Regional Governments And National And Interregional Economic Growth," Sociology and Social Work Review, International Society for projects in Education and Research, vol. 3(2), pages 6-31, December.
    • Handle: RePEc:edr:sswrgl:v:3:y:2019:i:2:p:6-31
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    More about this item

    Keywords

    tax competition; Nash equilibrium; multi-region economic dynamics; factor distribution; regional disparities in wealth and income; wealth accumulation; amenity.;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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