Mergers in Fiscal Federalism
AbstractThis paper analyzes mergers of regions in a two-tier setting with both horizontal and vertical tax competition. The merger of regions induces three effects on regional and local tax policies, which are transmitted both horizontally and vertically: i) an alleviation of tax competition at the regional level, ii) a rise in the regional tax base, and iii) a larger internalization of tax externalities generated by cities. It is shown that the merger of regions increases regional tax rates while decreasing local tax rates. This Nash equilibrium with mergers is then compared with the Nash equilibrium with coalitions of regions.
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Bibliographic InfoPaper provided by INRA UMR CESAER, Centre d'’Economie et Sociologie appliquées à l'’Agriculture et aux Espaces Ruraux in its series INRA UMR CESAER Working Papers with number 2010/6.
Date of creation: 06 Sep 2010
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Mergers; Tax Competition; Fiscal Federalism;
Other versions of this item:
- Breuillé, Marie-Laure & Zanaj, Skerdilajda, 2010. "Mergers in Fiscal Federalism," CCES Discussion Paper Series 37, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
- Marie-Laure Breuillé & Skerdilajda Zanaj, 2010. "Mergers in Fiscal Federalism," CREA Discussion Paper Series 10-10, Center for Research in Economic Analysis, University of Luxembourg.
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-10-16 (Accounting & Auditing)
- NEP-ALL-2010-10-16 (All new papers)
- NEP-PBE-2010-10-16 (Public Economics)
- NEP-PUB-2010-10-16 (Public Finance)
- NEP-URE-2010-10-16 (Urban & Real Estate Economics)
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