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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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    8. 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.
    9. Martin J. Osborne & Al Slivinksi, 1995. "A Model of Political Competition with Citizen-Candidates," Department of Economics Working Papers 1995-01, McMaster University.
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    15. Frey, Bruno S. & Eichenberger, Reiner, 1996. "To harmonize or to compete? That's not the question," Journal of Public Economics, Elsevier, vol. 60(3), pages 335-349, June.
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    18. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
    19. Fuest, Clemens & Huber, Bernd, 2001. "Tax competition and tax coordination in a median voter model," Munich Reprints in Economics 20292, University of Munich, Department of Economics.
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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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