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Tax Competition and International Public Goods

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  • Kjetil Bjorvatn

    ()

  • Guttorm Schjelderup

    ()

Abstract

A well known result in the tax competition literature is that tax rates are set too low in the Nash equilibrium to finance an efficient level of public consumption goods. In this model we introduce international spillovers in public goods provision and show that such spillovers reduce, and in the limiting case of perfect spillovers, eliminate tax competition. There is, however, always underprovision of the public good in equilibrium, since larger spillovers increase the problem of free riding. In an extension to the model, we demonstrate that congestion costs may result in overprovision of the public good. Copyright Kluwer Academic Publishers 2002

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Bibliographic Info

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

Volume (Year): 9 (2002)
Issue (Month): 2 (March)
Pages: 111-120

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Handle: RePEc:kap:itaxpf:v:9:y:2002:i:2:p:111-120

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

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Keywords: tax competition for capital; international public goods;

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