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Tax Competition Reconsidered

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  • Amrita Dhillon

    ()
    (Department of Economics, University of Warwick)

  • Myrna H. Wooders

    ()
    (Department of Economics, Vanderbilt University)

  • Ben Zissimos

    ()
    (Department of Economics, Vanderbilt University)

Abstract

In a classic model of tax competition, we show that the level of public good provision and taxation in a decentralized equilibrium can be efficient or inefficient with either too much, or too little public good provision. The key is whether there exists a unilateral incentive to deviate from the efficient state and, if so, whether this entails raising or lowering taxes. A priori, there is no reason to suppose the incentive is in either one direction or the other.

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File URL: http://www.accessecon.com/pubs/VUECON/vu06-w02.pdf
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Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0602.

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Date of creation: Jan 2006
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Handle: RePEc:van:wpaper:0602

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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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Keywords: Efficiency; Nash equilibrium; over-provision; tax competition; under-provision;

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