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A Note on the Composition of Public Expenditure under Capital Tax Competition

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  • Mutsumi Matsumoto

Abstract

Keen and Marchand ( Journalof Public Economics, 1997, 66, 33–53) argue that undercapital tax competition, the composition of public expenditureis inefficient in that too much is spent on public inputs benefitinglocal business and too little on public goods benefiting residents.Their result depends on labor immobility. This note shows thatthe Keen-Marchand argument may not hold if both labor and capitalare mobile. An interesting case is identified where capital taxationdoes not distort the mix of public goods and public inputs, eventhough the overall level of public expenditure is inefficientlylow. Copyright Kluwer Academic Publishers 2000

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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 7 (2000)
Issue (Month): 6 (December)
Pages: 691-697

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Handle: RePEc:kap:itaxpf:v:7:y:2000:i:6:p:691-697

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Web page: http://www.springerlink.com/link.asp?id=102915

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Keywords: capital tax competition; public inputs; public goods;

References

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  1. Matsumoto, Mutsumi, 2000. "A Tax Competition Analysis of Congestible Public Inputs," Journal of Urban Economics, Elsevier, vol. 48(2), pages 242-259, September.
  2. Wilson John Douglas, 1995. "Mobile Labor, Multiple Tax Instruments, and Tax Competition," Journal of Urban Economics, Elsevier, vol. 38(3), pages 333-356, November.
  3. Burbidge, John B. & Myers, Gordon M., 1994. "Population mobility and capital tax competition," Regional Science and Urban Economics, Elsevier, vol. 24(4), pages 441-459, August.
  4. Keen, Michael & Marchand, Maurice, 1997. "Fiscal competition and the pattern of public spending," Journal of Public Economics, Elsevier, vol. 66(1), pages 33-53, October.
  5. Russell Krelove, 1992. "Efficient Tax Exporting," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 145-55, February.
  6. Matsumoto, Mutsumi, 1998. "A note on tax competition and public input provision," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 465-473, July.
  7. Thorsten Bayindir-Upmann, 1998. "Two Games of Interjurisdictional Competition When Local Governments Provide Industrial Public Goods," International Tax and Public Finance, Springer, vol. 5(4), pages 471-487, October.
  8. Feehan, James P, 1989. "Pareto-Efficiency with Three Varieties of Public Input," Public Finance = Finances publiques, , vol. 44(2), pages 237-48.
  9. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
  10. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
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Citations

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Cited by:
  1. Shun-ichiro Bessho & Kimiko Terai, 2008. "Competition for Private Capital and Central Grants: The Case of Japanese Industrial Parks," Working Papers 080909, University of California-Irvine, Department of Economics.
  2. Diego Martínez-López, 2005. "On the states' behavior with equalization grants," Economic Working Papers at Centro de Estudios Andaluces E2005/03, Centro de Estudios Andaluces.
  3. Rainald Borck, 2005. "Fiscal Competition, Capital-Skill Complementarity, and the Composition of Public Spending," Discussion Papers of DIW Berlin 504, DIW Berlin, German Institute for Economic Research.
  4. Hikaru Ogawa, 2010. "Fiscal Competition among Regional Governments - Tax Competition, Expenditure Competition and Externalities -," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(1), pages 1-30, February.
  5. Carsten Colombier & Michael Pickhardt, 2005. "A Note on Public Input Specifications," International Advances in Economic Research, Springer, vol. 11(1), pages 13-18, March.
  6. Laura Solanko, 2002. "Fiscal competition in a transition economy," Public Economics 0209002, EconWPA.
  7. Aronsson, Thomas & Wehke, Sven, 2008. "Public goods, unemployment and policy coordination," Regional Science and Urban Economics, Elsevier, vol. 38(3), pages 285-298, May.
  8. Hannes Winner, 2012. "Fiscal Competition and the Composition of Public Expenditure: An Empirical Study," Contemporary Economics, University of Finance and Management in Warsaw, vol. 6(3), September.
  9. Kai Konrad, 2008. "Mobile tax base as a global common," International Tax and Public Finance, Springer, vol. 15(4), pages 395-414, August.
  10. Matsumoto, Mutsumi, 2008. "Redistribution and regional development under tax competition," Journal of Urban Economics, Elsevier, vol. 64(2), pages 480-487.e1, September.
  11. Christoph Sauer & Margit Schratzenstaller, 2002. "Strategies Of International Fiscal Competition For Foreign Direct Investment In A Model With Impure Public Inputs," Departmental Discussion Papers 115, University of Goettingen, Department of Economics.
  12. Matsumoto, Mutsumi & Feehan, James P., 2010. "Capital-tax financing and scale economies in public-input production," Regional Science and Urban Economics, Elsevier, vol. 40(2-3), pages 116-121, May.
  13. Lenka Šťastná, 2009. "Spatial Interdependence of Local Public Expenditures: Selected Evidence from the Czech Republic," Working Papers IES 2009/12, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Mar 2009.
  14. Nelly Exbrayat & Thierry Madiès & Stéphane Riou, 2010. "International tax competition: do public good spillovers matter?," International Tax and Public Finance, Springer, vol. 17(5), pages 479-500, October.
  15. Markus Leibrecht & Michael Klien & Oezlem Onaran, 2011. "Globalization, welfare regimes and social protection expenditures in Western and Eastern European countries," Public Choice, Springer, vol. 148(3), pages 569-594, September.
  16. Yongzheng Liu & Jorge Martinez-Vazquez, 2011. "Public Input Competition, Stackelberg Equilibrium and Optimality," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1123, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  17. Matsumoto, Mutsumi, 2004. "The mix of public inputs under tax competition," Journal of Urban Economics, Elsevier, vol. 56(2), pages 389-396, September.
  18. Heinz Handler & Andreas Knabe & Bertrand Koebel & Margit Schratzenstaller & Sven Wehke, 2005. "The Impact of Public Budgets on Overall Productivity Growth," WIFO Working Papers 255, WIFO.

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