Janeba, Eckhard () (Dept. of Economics, University of Mannheim) Schjelderup, Guttorm () (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
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The views on the welfare effects of tax competition differ widely. Some see the fiscal externalities as the cause for underprovision of public goods, while others see tax competition as means to reduce government inefficiencies. Using a comparative politics approach we show that tax competition among presidential-congressional democracies is typically welfare improving, while harmful among parliamentary democracies if under the latter the marginal benefit of the public good is sufficiently high. The results hold when politicians seek re-election because of exogenous benefits of holding office. By contrast, when politicians hold office only to extract rents, tax competition is harmful if politicians are sufficiently patient.
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Paper provided by Department of Finance and Management Science, Norwegian School of Economics and Business Administration in its series Discussion Papers with number
2008/22.
Length: 28 pages Date of creation: 17 Oct 2008 Date of revision: Handle: RePEc:hhs:nhhfms:2008_022
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Find related papers by JEL classification: H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
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Torsten Persson & Gerard Roland & Guido Tabellini, .
"Comparative Politics and Public Finance,"
Working Papers
114, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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