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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 taxcompetition 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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    File URL: http://econstor.eu/bitstream/10419/47083/1/257642242.pdf
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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 732.

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    Date of creation: 1996
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    Handle: RePEc:kie:kieliw:732

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    1. DREZE , Jacques H., 1993. "Regions of Europe : A Feasible Status, to be discussed," CORE Discussion Papers 1993037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
    3. repec:fth:louvco:9337 is not listed on IDEAS
    4. Epple, Dennis & Zelenitz, Allan, 1981. "The Implications of Competition among Jurisdictions: Does Tiebout Need Politics?," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1197-1217, December.
    5. Jeremy Edwards & Michael Keen, 1994. "Tax competition and Leviathon," IFS Working Papers W94/07, Institute for Fiscal Studies.
    6. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
    7. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
    8. Paul M. Romer, 1993. "New Goods, Old Theory, and the Welfare Costs of Trade Restrictions," NBER Working Papers 4452, National Bureau of Economic Research, Inc.
    9. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
    10. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
    11. 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.
    12. Siebert, Horst & Koop, Michael J, 1993. "Institutional Competition versus Centralization: Quo Vadis Europe?," Oxford Review of Economic Policy, Oxford University Press, vol. 9(1), pages 15-30, Spring.
    13. Siebert, Horst & Koop, Michael J., 1993. "Institutional competition versus centralization: Quo vadis Europe?," Kiel Working Papers 548, Kiel Institute for the World Economy.
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    Cited by:
    1. Lorz, Oliver, 1998. "Capital mobility, tax competition, and lobbying for redistributive capital taxation," European Journal of Political Economy, Elsevier, vol. 14(2), pages 265-279, May.

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