Federal tax competition and the efficiency consequences for local taxation of revenue equalization
Recent work has shown that a system of equalization grants can limit tax competition among lower-level governments. The structure of such models, however, does not allow for the federal to be an active player but its role is being limited in the administration of the equalization grants. The implication of this is that potentially important, for the efficiency properties of lower-level government taxation, vertical fiscal externalities are ignored. This paper introduces equalization grants into a standard federal capital tax competition model in which fiscal externalities arise not only horizontally, between jurisdictions, but also vertically between the levels of government. It is shown that, even in the presence of vertical fiscal inefficiencies, efficiency in the level of lower-level government taxation can be achieved by a modifying version of a standard equalization grant formula.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robin Boadway and Michael Keen, .
"Efficiency and the Optimal Direction of Federal-State Transfers,"
Economics Discussion Papers
445, University of Essex, Department of Economics.
- Robin Boadway & Michael Keen, 1996. "Efficiency and the optimal direction of federal-state transfers," International Tax and Public Finance, Springer, vol. 3(2), pages 137-155, May.
- Boadway, R & Keen, M, 1996. "Efficiency and the optimal direction of federal-state transfers," IFS Working Papers W96/01, Institute for Fiscal Studies.
- Michael Smart, 2007.
"Raising taxes through equalization,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 40(4), pages 1188-1212, November.
- Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
- DePeter James A. & Myers Gordon M., 1994. "Strategic Capital Tax Competition: A Pecuniary Externality and a Corrective Device," Journal of Urban Economics, Elsevier, vol. 36(1), pages 66-78, July.
- Bev Dahlby, 2008. "The Marginal Cost of Public Funds: Theory and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262042509, June.
- Sam Bucovetsky & Michael Smart, 2006.
"The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 8(1), pages 119-144, 01.
- Sam Bucovetsky & Michael Smart, 2002. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," CESifo Working Paper Series 767, CESifo Group Munich.
- Thiess Büttner & Sebastian Hauptmeier & Robert Schwager, 2006.
"Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany,"
CESifo Working Paper Series
1656, CESifo Group Munich.
- Thiess Buettner & Robert Schwager & Sebastian Hauptmeier, 2011. "Efficient Revenue Sharing and Upper-Level Governments: Theory and Application to Germany," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(4), pages 647-667, December.
- Buettner, Thiess & Hauptmeier, Sebastian & Schwager, Robert, 2006. "Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany," ZEW Discussion Papers 06-13, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Leonzio Rizzo, 2008.
"Local government responsiveness to federal transfers: theory and evidence,"
International Tax and Public Finance,
Springer, vol. 15(3), pages 316-337, June.
- Rizzo, Leonzio, 2006. "Local government responsiveness to federal transfers: theory and evidence," MPRA Paper 5373, University Library of Munich, Germany.
- Sotiris Karkalakos & Christos Kotsogiannis, 2007. "A spatial analysis of provincial corporate income tax responses: evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 40(3), pages 782-811, August.
- Hoyt, William H., 1991. "Property taxation, Nash equilibrium, and market power," Journal of Urban Economics, Elsevier, vol. 30(1), pages 123-131, July.
- 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.
When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:17:y:2010:i:1:p:1-14. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.