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Tax Competition Reconsidered

  • AMRITA DHILLON
  • MYRNA WOODERS
  • BEN ZISSIMOS

In a classic model of tax competition, this paper shows 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. Copyright 2007 Blackwell Publishing, Inc..

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Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 9 (2007)
Issue (Month): 3 (06)
Pages: 391-423

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Handle: RePEc:bla:jpbect:v:9:y:2007:i:3:p:391-423
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