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Redistribution and regional development under tax competition

  • Matsumoto, Mutsumi

This paper considers how capital tax competition affects transfer and development policies in the presence of regional income disparity. In each country, development policies determine the number of rich (poor) regions that (do not) engage in production activities, while transfer policies redistribute income between rich and poor regions. The mix of transfer and development policies is inefficient under tax competition: conditional on the equilibrium tax rate, too much revenue is spent on development policies and too little on transfer policies. This analysis of the expenditure mix implies that development policies are used as a means of regional redistribution even if transfer policies are efficient instruments for this purpose. Moreover, it is shown that the overall level of public expenditure may be too high because of the possibility of over-development.

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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 64 (2008)
Issue (Month): 2 (September)
Pages: 480-487.e1

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Handle: RePEc:eee:juecon:v:64:y:2008:i:2:p:480-487.e1
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. CREMER, Helmuth & FOURGEAUD, Virginie & LEITE-MONTEIRO, Manuel & MARCHAND, Maurice, . "Mobility and redistribution: A survey," CORE Discussion Papers RP -1371, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Wilson, John Douglas, 2005. "Welfare-improving competition for mobile capital," Journal of Urban Economics, Elsevier, vol. 57(1), pages 1-18, January.
  3. KEEN, Michael & MARCHAND, Maurice, 1996. "Fiscal Competition and the Pattern of Public Spending," CORE Discussion Papers 1996001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Wooders, Myrna & Zissimos, Ben & Dhillon, Amrita, 2001. "Tax Competition Reconsidered," The Warwick Economics Research Paper Series (TWERPS) 622, University of Warwick, Department of Economics.
  5. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
  6. CREMER, Helmuth & PESTIEAU, Pierre, . "Factor mobility and redistribution," CORE Discussion Papers RP -1749, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Norihiko Yamano & Toru Ohkawara, 2000. "The Regional Allocation of Public Investment: Efficiency or Equity?," Journal of Regional Science, Wiley Blackwell, vol. 40(2), pages 205-229.
  8. Noiset Luc, 1995. "Pigou, Tiebout, Property Taxation, and the Underprovision of Local Public Goods: Comment," Journal of Urban Economics, Elsevier, vol. 38(3), pages 312-316, November.
  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.
  10. Matsumoto, Mutsumi, 2004. "The mix of public inputs under tax competition," Journal of Urban Economics, Elsevier, vol. 56(2), pages 389-396, September.
  11. Matsumoto, Mutsumi, 2000. "A Tax Competition Analysis of Congestible Public Inputs," Journal of Urban Economics, Elsevier, vol. 48(2), pages 242-259, September.
  12. Mutsumi Matsumoto, 2010. "Entry in tax competition: a note," International Tax and Public Finance, Springer, vol. 17(6), pages 627-639, December.
  13. Mutsumi Matsumoto, 2000. "A Note on the Composition of Public Expenditure under Capital Tax Competition," International Tax and Public Finance, Springer, vol. 7(6), pages 691-697, December.
  14. Matsumoto, Mutsumi, 1998. "A note on tax competition and public input provision," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 465-473, July.
  15. Farrell, Mary, 2004. "Regional integration and cohesion--lessons from Spain and Ireland in the EU," Journal of Asian Economics, Elsevier, vol. 14(6), pages 927-946, January.
  16. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
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