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Tax competition in federations revisited

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  • Pi, Jiancai
  • Zhou, Yu

Abstract

We extend Keen and Kotsogiannis (2002, 2004) by considering all-purpose public goods that are beneficial to both producers and consumers. Horizontal externality (resp. vertical externality) exerted by tax competition will not necessarily lead to inefficient outcomes.

Suggested Citation

  • Pi, Jiancai & Zhou, Yu, 2014. "Tax competition in federations revisited," Economics Letters, Elsevier, vol. 123(1), pages 104-107.
  • Handle: RePEc:eee:ecolet:v:123:y:2014:i:1:p:104-107
    DOI: 10.1016/j.econlet.2014.01.024
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    References listed on IDEAS

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    1. Dahlby, Bev & Wilson, Leonard S., 2003. "Vertical fiscal externalities in a federation," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 917-930, May.
    2. Thomas Eichner & Marco Runkel, 2012. "Interjurisdictional Spillovers, Decentralized Policymaking, and the Elasticity of Capital Supply," American Economic Review, American Economic Association, vol. 102(5), pages 2349-2357, August.
    3. Keen, Michael J. & Kotsogiannis, Christos, 2004. "Tax competition in federations and the welfare consequences of decentralization," Journal of Urban Economics, Elsevier, vol. 56(3), pages 397-407, November.
    4. Michael J. Keen & Christos Kotsogiannis, 2002. "Does Federalism Lead to Excessively High Taxes?," American Economic Review, American Economic Association, vol. 92(1), pages 363-370, March.
    5. Wigger, Berthold U. & Wartha, Udo, 2004. "Vertical tax externalities and the composition of public spending in a federation," Economics Letters, Elsevier, vol. 84(3), pages 357-361, September.
    6. Anwar, Sajid, 2006. "Provision of public infrastructure, foreign investment and welfare in the presence of specialisation-based external economies," Economic Modelling, Elsevier, vol. 23(1), pages 142-156, January.
    7. Wilson, John Douglas & Janeba, Eckhard, 2005. "Decentralization and international tax competition," Journal of Public Economics, Elsevier, vol. 89(7), pages 1211-1229, July.
    8. Pi, Jiancai & Zhou, Yu, 2014. "Foreign capital, public infrastructure, and wage inequality in developing countries," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 195-207.
    9. 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.
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    Cited by:

    1. Florence TOUYA, 2016. "Horizontal and Vertical Tax Interactions in a Common Agency Game," Working Papers 2015-2016_12, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2016.
    2. Florence TOUYA, 2016. "EU tax competition and tax avoidance: A multiprincipal perspective," Working Papers 2015-2016_11, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2016.

    More about this item

    Keywords

    Vertical tax competition; Public goods provision; Vertical externality; Horizontal externality;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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