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Public Input Provision, Tax Base Mobility, and External Ownership

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  • Mutsumi Matsumoto

Abstract

This article investigates the distortionary impacts of tax base mobility and external ownership on public input provision. Regional governments compete for mobile tax bases (e.g., business capital). The impact of regional public policy partially accrues to non-residents because immobile factors (e.g., business land) are subject to external ownership. This article derives an optimal rule for regional public input provision that illustrates how these two distortionary impacts depend on the nature of production functions. The impact of external ownership is particularly complex. To explore this impact in detail, the case of production functions with constant elasticity of substitution is examined. Public inputs with different productivity impacts yield fairly different implications of external ownership for inefficient public input provision.

Suggested Citation

  • Mutsumi Matsumoto, 2021. "Public Input Provision, Tax Base Mobility, and External Ownership," Public Finance Review, , vol. 49(5), pages 754-776, September.
    • Handle: RePEc:sae:pubfin:v:49:y:2021:i:5:p:754-776
    DOI: 10.1177/10911421211050268
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    References listed on IDEAS

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    1. Kangoh Lee, 2003. "Should land and capital be taxed at a uniform rate?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(2), pages 350-372, May.
    2. Peter S. Fisher & Alan H. Peters, 1998. "Industrial Incentives: Competition among American Cities and States," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ii.
    3. George R. Zodrow & Peter Mieszkowski, 2019. "Pigou, Tiebout, Property Taxation, and the Underprovision of Local Public Goods," World Scientific Book Chapters, in: George R Zodrow (ed.), TAXATION IN THEORY AND PRACTICE Selected Essays of George R. Zodrow, chapter 17, pages 525-542, World Scientific Publishing Co. Pte. Ltd..
    4. Kangoh Lee, 2003. "Should land and capital be taxed at a uniform rate?," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 350-372, May.
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