Interjurisdictional Tax Competition in a Federal System of Overlapping Revenue Maximizing Governments
AbstractAcademic literature in public finance has focused on interjurisdictional tax competition—namely among similar types of local governments—but has leaved vertical externalities arising from interactions between two overlapping governments sharing the same tax base aside. The purpose of this paper is to provide a simple model within which interjurisdictional tax competition and vertical interactions between two overlapping governments that share the same tax base can be analyzed simultaneously. We find that interjurisdictional tax competition reduces the global tax rate set by both overlapping governments (federal and local) but is unable to solve completely the distortion arising from vertical externalities. The model is also extended to allow for government subsidies to industrial capital. We give sufficient conditions for capital subsidies to be more efficient to attract capital when they are granted at a federal level rather than at a local level. Copyright Kluwer Academic Publishers 2002
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Springer in its journal International Tax and Public Finance.
Volume (Year): 9 (2002)
Issue (Month): 2 (March)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=102915
tax competition; Leviathan; tax base sharing; capital subsidies;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Forbes, Kevin F & Zampelli, Ernest M, 1989. "Is Leviathan a Mythical Beast?," American Economic Review, American Economic Association, vol. 79(3), pages 568-77, June.
- Goodspeed, Timothy J., 2000. "Tax structure in a federation," Journal of Public Economics, Elsevier, vol. 75(3), pages 493-506, March.
- Beck, John H., 1993. "Tax abatement and tax rates in a system of overlapping revenue-maximizing governments," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 645-665, November.
- Zax, Jeffrey S, 1989. "Is There a Leviathan in Your Neighborhood?," American Economic Review, American Economic Association, vol. 79(3), pages 560-67, June.
- Oates, Wallace E, 1985. "Searching for Leviathan: An Empirical Study," American Economic Review, American Economic Association, vol. 75(4), pages 748-57, September.
- Alexander Libman, 2012. "Sub-national political regimes and asymmetric fiscal decentralization," Constitutional Political Economy, Springer, vol. 23(4), pages 302-336, December.
- Lisa Grazzini & Alessandro Petretto, 2013. "Federalism with Bicameralism," Working Papers - Economics wp2013_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
- Florence LACHET-TOUYA, 2013. "Tax Interactions with Asymmetric Information and Nonlinear Instruments," Working Papers 2012-2013_9, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Jul 2013.
- Michael Keen & Christos Kotsogiannis, 2003. "Leviathan and Capital Tax Competition in Federations," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 177-199, 04.
- William Hoyt, 2005. "The Assignment and Division of the Tax Base in a System of Hierarchical Governments," Working Papers 2005-07, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
- Florence TOUYA, 2009. "Tax Interactions with Asymmetric Information and Nonlinear Instruments," Working Papers 9, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Nov 2009.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.