Tax Competition and Tax Coordination in a Median Voter Model
This paper analyzes the welfare effects of capital tax coordination in a simple model of fiscal competition where fiscal policy is subject to majority voting and households differ with respect to their labor and capital income. It turns out that a coordinated capital tax increase may raise or reduce welfare, depending on the relative magnitude of i) economic distortions induced by a labor tax and ii) political distortions resulting from the influence of the median voter on fiscal policy decisions. A negative welfare effect is more likely, the smaller the marginal excess burden of the labor tax and the smaller the ratio of the median voter's labor income to average labor income. We also use empirical estimates of the marginal excess burden of taxation to determine the welfare effects of tax coordination; it turns out that a negative welfare effect of coordinated tax increases may emerge in our model for empirically reasonable parameters. Copyright Kluwer Academic Publishers 2001
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.:
- Jeremy Edwards & Michael Keen, 1994.
"Tax competition and Leviathon,"
IFS Working Papers
W94/07, Institute for Fiscal Studies.
- Haufler, Andreas, 1996.
"Factor taxation, income distribution, and capital market integration,"
Discussion Papers, Series II
315, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
- Haufler, Andreas, 1997. " Factor Taxation, Income Distribution and Capital Market Integration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(3), pages 425-46, September.
- Haufler, Andreas, 1997. "Factor taxation, income distribution and capital market integration," Munich Reprints in Economics 20390, University of Munich, Department of Economics.
- Torsten Persson & Guido Tabellini, 1992.
"The Politics of 1992: Fiscal Policy and European Integration,"
Review of Economic Studies,
Oxford University Press, vol. 59(4), pages 689-701.
- Persson, Torsten & Tabellini, Guido, 1991. "The Politics of 1992: Fiscal Policy and European Integration," CEPR Discussion Papers 501, C.E.P.R. Discussion Papers.
- Torsten Persson & Guido Tabellini, 1990. "The Politics of 1992: Fiscal Policy and European Integration," NBER Working Papers 3460, National Bureau of Economic Research, Inc.
- Fuest, Clemens, 2000. "The Political Economy of Tax Coordination as a Bargaining Game between Bureaucrats and Politicians," Public Choice, Springer, vol. 103(3-4), pages 357-82, June.
- Massimo Bordignon & Paolo Manasse & Guido Tabellini, 2001.
"Optimal Regional Redistribution under Asymmetric Information,"
American Economic Review,
American Economic Association, vol. 91(3), pages 709-723, June.
- Bordignon, Massimo & Manasse, Paolo & Tabellini, Guido, 1996. "Optimal Regional Redistribution Under Asymmetric Information," CEPR Discussion Papers 1437, C.E.P.R. Discussion Papers.
- Massimo Bordignon & Paolo Manasse & Guido Tabellini, . "Optimal Regional Redistribution Under Asymmetric Information," Working Papers 93, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Werner W. Pommerehne & Bruno S. Frey, 1976.
"Two Approaches To Estimating Public Expenditures,"
Public Finance Review,
SAGE Publishing, vol. 4(4), pages 395-407, October.
- Fullerton, Don, 1991. "Reconciling Recent Estimates of the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 302-08, March.
- Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
- Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
- WILDASIN, David E., .
"Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy,"
CORE Discussion Papers RP
831, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Wildasin, David E., 1989. "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," Journal of Urban Economics, Elsevier, vol. 25(2), pages 193-212, March.
- Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
- Rama, Martin & Tabellim, Guido, 1998.
"Lobbying by capital and labor over trade and labor market policies,"
European Economic Review,
Elsevier, vol. 42(7), pages 1295-1316, July.
- Martín Rama & Guido Tabellini, . "Lobbying by Capital and Labor over Trade and Labor Market Policies," Working Papers 94, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Michael Keen, 1993. "The welfare economics of tax co-ordination in the European Community : a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 14(2), pages 15-36, February.
- Frey, Bruno S. & Eichenberger, Reiner, 1996. "To harmonize or to compete? That's not the question," Journal of Public Economics, Elsevier, vol. 60(3), pages 335-349, June.
- GRAZZINI, Lisa & van YPERSELE, Tanguy, 1997. "Tax harmonisation and political competition," CORE Discussion Papers 1997054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Coates, Dennis, 1993. "Tax Competition Among Jurisdictions With Public and Private Employment," National Tax Journal, National Tax Association, vol. 46(2), pages 177-89, June.
- Pommerehne, Werner W., 1978. "Institutional approaches to public expenditure : Empirical evidence from Swiss municipalities," Journal of Public Economics, Elsevier, vol. 9(2), pages 255-280, April.
When requesting a correction, please mention this item's handle: RePEc:kap:pubcho:v:107:y:2001:i:1:p:97-113. 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 (Rebekah McClure)
If references are entirely missing, you can add them using this form.