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Interjurisdictional Competition and the Efficiency of the Public Sector: The Triumph of the Market over the State?

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Rauscher, Michael

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Abstract

It has been argued in the literature that interjurisdictional competition forces the public sector to increase its efficiency and thus helps to tame Leviathan governments. The paper addresses this hypothesis by means of a simple tax-competition model with a Leviathan state. It is seen that the effects of increased factor mobility on the efficiency of the public sector are ambiguous. A calibration of the model shows that a reduction in public-sector efficiency is possible for parameter constellations which are not unrealistic.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1624.

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Date of creation: Apr 1997
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Handle: RePEc:cpr:ceprdp:1624

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Related research
Keywords: Capital Movements; Infrastructure; Public Choice; Tax Competition;

Find related papers by JEL classification:
F20 - International Economics - - International Factor Movements and International Business - - - General
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H40 - Public Economics - - Publicly Provided Goods - - - General
H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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  1. Michael Rauscher, 1997. "Leviathan and Competition among Jurisdictions: The Case of Benefit Taxation," Thuenen-Series of Applied Economic Theory 13, University of Rostock, Institute of Economics, Germany. [Downloadable!]
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This page was last updated on 2009-12-31.

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