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Interregional Tax Competition and Intraregional Political Competition: The Optimal Provision of Public Goods

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  • Toshihiro Ihori

    (Faculty of Economics, University of Tokyo)

  • C. C. Yang

    (Institute of Economics, Academia Sinica and Department of Public Finance, National Chengchi University)

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    Abstract

    This paper explores the implications of the interaction between interregional tax competition and intraregional political competition for the optimal provision of public goods. In contrast to Hoyt's (1991) finding that the extent to which public goods are undersupplied is monotonically increasing in the number of competing regions, we show that the relationship between the level of public good supply and the number of competing regions is nonmonotonic if political as well as tax competition is considered. Interestingly, some certain interaction between interregional tax competition and intraregional political competition can result in the optimal provision of public goods.

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    Bibliographic Info

    Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-553.

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    Length: 24 pages
    Date of creation: Apr 2008
    Date of revision:
    Handle: RePEc:tky:fseres:2008cf553

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    11. Persson, Torsten & Tabellini, Guido, 1992. "The Politics of 1992: Fiscal Policy and European Integration," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 689-701, October.
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    18. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
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    Cited by:
    1. Geys, Benny & Konrad, Kai A., 2010. "Federalism and optimal allocation across levels of governance," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2010-09, Social Science Research Center Berlin (WZB).

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