Strategic tax and public service competition among local governments
AbstractTax and public service competition between local governments concerning localisation of new residents is analysed in a setting of economic spillovers which means that also a neighbouring region will benefit from localisation via demand of residents in a border region, (a so-called host region). We identify two basic Nash-equilibrium outcomes of the analysed tax-game. In one of these outcomes local tax rates will be different across the regions – a fact that appears important for (future) empirical studies of local tax competition. Due to the lack of adequate theoretical modelling, studies in this field have often demonstrated spatial dependence of local policy variables without identifying the source of interaction between decision-makers. Our theoretical findings prove to be robust to a range of important expansions of the basic simple framework.
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Bibliographic InfoPaper provided by Department of Business and Economics, University of Southern Denmark in its series Discussion Papers of Business and Economics with number 9/2011.
Length: 29 pages
Date of creation: 01 Dec 2011
Date of revision:
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Postal: Department of Business and Economics, University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark
Phone: 65 50 32 33
Fax: 65 50 32 37
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Local tax competition; household locational choice; spillover effects; Nash-equilibria;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-02-08 (Accounting & Auditing)
- NEP-ALL-2012-02-08 (All new papers)
- NEP-CSE-2012-02-08 (Economics of Strategic Management)
- NEP-GEO-2012-02-08 (Economic Geography)
- NEP-PBE-2012-02-08 (Public Economics)
- NEP-PUB-2012-02-08 (Public Finance)
- NEP-URE-2012-02-08 (Urban & Real Estate Economics)
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