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Fiscal Competition and the Pattern of Public Spending

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  • KEEN, Michael

    (Department of Economics, University of Essex, Wivenhoe Park, Colchester C04 3SQ and the Institute for Fiscal Studies, UK)

  • MARCHAND, Maurice

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Abstract

Much attention has been given to the impact of fiscal competition on the level of public expenditure, but relatively little to the impact on its composition. Using a broadly familiar and reasonably rich model of fiscal competition in the presence of mobile capital, this paper establishes a systematic bias in public spending patterns: starting from the non-cooperative equilibrium, and holding tax rates constant, welfare would be improved by a coordinated reduction in the provision of local public inputs and a corresponding increase in the public provision of local public goods benefiting immobile consumers.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1996001.

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Date of creation: 01 Feb 1996
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Handle: RePEc:cor:louvco:1996001

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  1. Huizinga, Harry & Nielsen, Soren Bo, 1997. "Capital income and profit taxation with foreign ownership of firms," Journal of International Economics, Elsevier, vol. 42(1-2), pages 149-165, February.
  2. Jan-Egbert Sturm & Gerard H. Kuper & Jakob de Haan,, 1996. "Modelling government investment and economic growth at the macro level: A review," Working Papers 29, Centre for Economic Research, University of Groningen and University of Twente.
  3. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
  4. Oates, Wallace E, 1985. "Searching for Leviathan: An Empirical Study," American Economic Review, American Economic Association, vol. 75(4), pages 748-57, September.
  5. MINTZ, Jacques & TULKENS , Henry, 1994. "Optimality Properties of Alternative Systems of Taxation of Foreign Capital Income," CORE Discussion Papers 1994078, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Jeremy Edwards & Michael Keen, 1994. "Tax competition and Leviathon," IFS Working Papers W94/07, Institute for Fiscal Studies.
  7. Richter, Wolfram F. & Wellisch, Dietmar, 1996. "The provision of local public goods and factors in the presence of firm and household mobility," Journal of Public Economics, Elsevier, vol. 60(1), pages 73-93, April.
  8. Beck, John H., 1983. "Tax competition, uniform assessment, and the benefit principle," Journal of Urban Economics, Elsevier, vol. 13(2), pages 127-146, March.
  9. Mintz, J. & Tulkens, H., 1984. "Commodity tax competition between member states of a federation: equilibrium and efficiency," CORE Discussion Papers 1984027, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Clarida, Richard & Findlay, Ronald, 1994. "After Maastricht: Public Investment, Economic Integration and International Capital Mobility," Economica, London School of Economics and Political Science, vol. 61(243), pages 319-29, August.
  11. Mintz, J., 1996. "Optimality properties of alternative systems of taxation of foreign capital income. J. Public Econ," Open Access publications from Université catholique de Louvain info:hdl:2078.1/62991, Université catholique de Louvain.
  12. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  13. Decrombrugghe, A., 1990. "On Pareto Improving Commodity Tax Changes Under Fiscal Competition. J. Public Econ," Open Access publications from Université catholique de Louvain info:hdl:2078.1/52043, Université catholique de Louvain.
  14. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
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