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Modelling Tax Decentralisation And Regional Growth

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  • Ramiro Gil-Serrate

    ()
    (Universidad de Zaragoza)

  • Julio López-Laborda

    ()
    (Universidad de Zaragoza)

Abstract

. The aim of this paper is to determine a theoretical linkage between tax decentralisation and regional growth. For this purpose Zou’s (1996) analytical framework, which account for the potential effects of intergovernmental policies on regional growth, is considered. In this context a tax decentralisation indicator with a flypaper effect is introduced and a Cobb-Douglas form for the production technology is specified. As a consequence an optimal level of tax decentralisation for regional growth is obtained, it depends on private and public capital productivities, the tax burden rate in the absence of decentralisation and the intensity of the flypaper effect. Finally a hypothesis for the Spanish economy is obtained. It will be checked empirically in subsequent work.

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Paper provided by Instituto de Estudios Fiscales in its series Working Papers with number 14-05 Classification-JEL : H77, O41, R13..

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Handle: RePEc:hpe:wpaper:y:2005:i:14

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Keywords: tax decentralisation; general equilibrium analysis; regional growth.;

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