The Political Economy of Tax Coordination as a Bargaining Game between Bureaucrats and Politicians
In the public finance literature, the view prevails that tax competition among countries gives rise to an underprovision of public goods and that coordinated tax increases are therefore desirable. Public choice arguments, in contrast, suggest that tax coordination may not be in the interest of the taxpayers/citizens because imperfections of the political process (political distortions) may lead to a waste of tax money. According to this view, tax competition is a desirable check on the power to tax whereas tax coordination would only relax the budget constraint of an inefficient public sector. The present paper integrates the underprovision argument and the public choice view into a common theoretical framework. The government is assumed to consist of politicians and bureaucrats with diverging interests. Fiscal policy is modelled as the outcome of a bargaining game between the bureaucrats and the politicians. It turns out that coordinated tax increases always raise the provision of public goods but also increase the cost of political distortions. The effect on the welfare of the representative citizen may be positive or negative, depending in particular on the distribution of bargaining power between bureaucrats and politicians. Copyright 2000 by Kluwer Academic Publishers
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.
When requesting a correction, please mention this item's handle: RePEc:kap:pubcho:v:103:y:2000:i:3-4:p:357-82. 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: (Sonal Shukla)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.