Tax Competition and Revelation of Preferences for Public Expenditure
AbstractThis paper considers a federal country composed of local jurisdictions which differ in their taste for public goods and finance public spending by a source-based tax on capital income. The taste for public goods is private information of jurisdictions. By transferring differential grants to jurisdictions the central government aims at both reducing the misallocation of capital due to the diverging jurisdictional tax rates on capital income and getting closer to the optimal balance between private and public consumption in every jurisdiction. The purpose of the paper is to characterize the optimal grant policy of the central government. It is shown that there persist at the optimum both some misallocation of capital and some violation of the Samuelson rule in every jurisdiction.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Urban Economics.
Volume (Year): 44 (1998)
Issue (Month): 3 (November)
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Web page: http://www.elsevier.com/locate/inca/622905
Other versions of this item:
- BUCOVETSKY, Sam & MARCHAND, Maurice & PESTIEAU, Pierre, 1997. "Tax competition and revelation of preferences for public expenditure," CORE Discussion Papers 1997003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- BUCOVETSKY, Sam & MARCHAND, Maurice & PESTIEAU, Pierre, . "Tax competition and revelation of preferences for public expenditure," CORE Discussion Papers RP -1352, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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