This paper examines a system of governments that finance public expenditures with taxes on mobile capital. Unlike previous research on "tax competition," expli cit consideration is given to the general-equilibrium determination o f the prices at which goods are traded between regions. The analysis identifies inefficiencies in government behavior that are not apparen t in models in which the terms of trade are exogenously given. Capita l taxation is shown to create an inefficient distribution of public-g ood outputs across regions, accompanied by an inefficient pattern of trade. A model is presented in which the chosen levels of public-good outputs differ across regions containing identical residents and pro duction possibilities. Copyright 1987 by University of Chicago Press.
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Volume (Year): 95 (1987) Issue (Month): 4 (August) Pages: 835-56 Download reference. The following formats are available: HTML,
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Handle: RePEc:ucp:jpolec:v:95:y:1987:i:4:p:835-56
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Amrita Dhillon & Myrna H. Wooders & Ben Zissimos, 2006.
"Tax Competition Reconsidered,"
Working Papers
0602, Department of Economics, Vanderbilt University.
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