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A Note on Intertemporal Fiscal Competition and Redistribution

  • Kersten Kellermann

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    This paper studies fiscal competition among jurisdictions in a dynamic framework, where the degree of mobility of private capital across jurisdictions boundaries is perfect. The optimal tax on mobile capital is a source tax that taxes away factor rents. Further we show that taxation of mobile capital can redistribute income in favor of the immobile factor labor. This is because the factor rents generated by public inputs and appropriated by mobile capital exceed the efficient level of public expenditure for investments. Copyright Springer Science + Business Media, Inc. 2006

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    File URL: http://hdl.handle.net/10.1007/s10797-006-2462-3
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    Article provided by Springer in its journal International Tax and Public Finance.

    Volume (Year): 13 (2006)
    Issue (Month): 2 (May)
    Pages: 151-161

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    Handle: RePEc:kap:itaxpf:v:13:y:2006:i:2:p:151-161
    Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102915

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    1. Feehan, James P, 1989. "Pareto-Efficiency with Three Varieties of Public Input," Public Finance = Finances publiques, , vol. 44(2), pages 237-48.
    2. Taylor, Leon, 1992. "Infrastructural competition among jurisdictions," Journal of Public Economics, Elsevier, vol. 49(2), pages 241-259, November.
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    4. Sinn, Hans-Werner, 1997. "The selection principle and market failure in systems competition," Munich Reprints in Economics 19854, University of Munich, Department of Economics.
    5. Keen, Michael & Marchand, Maurice, 1997. "Fiscal competition and the pattern of public spending," Journal of Public Economics, Elsevier, vol. 66(1), pages 33-53, October.
    6. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
    7. Zodrow, George R., 2001. "The Property Tax as a Capital Tax: A Room with Three Views," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 139-56, March.
    8. Kim, Jinyoung & Wilson, John Douglas, 1997. "Capital mobility and environmental standards: Racing to the bottom with multiple tax instruments," Japan and the World Economy, Elsevier, vol. 9(4), pages 537-551, December.
    9. repec:cup:cbooks:9780521630351 is not listed on IDEAS
    10. Wildasin, David E., 1999. "Factor mobility and fiscal policy in the EU: policy issues and analytical approaches," ZEW Discussion Papers 99-35, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    11. Noiset, Luc & Oakland, William, 1995. "The taxation of mobile capital by central cities," Journal of Public Economics, Elsevier, vol. 57(2), pages 297-316, June.
    12. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
    13. Richter, W.F., 1991. "The Efficient Allocation of Local Public Factors in Tiebout's Tradition," The Warwick Economics Research Paper Series (TWERPS) 378, University of Warwick, Department of Economics.
    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. Thorsten Bayindir-Upmann, 1998. "Two Games of Interjurisdictional Competition When Local Governments Provide Industrial Public Goods," International Tax and Public Finance, Springer, vol. 5(4), pages 471-487, October.
    16. Richter, Wolfram F. & Wellisch, Dietmar, 1996. "The provision of local public goods and factors in the presence of firm and household mobility," Journal of Public Economics, Elsevier, vol. 60(1), pages 73-93, April.
    17. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
    18. Matsumoto, Mutsumi, 2000. "A Tax Competition Analysis of Congestible Public Inputs," Journal of Urban Economics, Elsevier, vol. 48(2), pages 242-259, September.
    19. Wildasin, David E. & Wilson, John Douglas, 1996. "Imperfect mobility and local government behaviour in an overlapping-generations model," Journal of Public Economics, Elsevier, vol. 60(2), pages 177-198, May.
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