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Decentralized leadership in a federation and competition for mobile firms: Does economic integration matter?

Author

Listed:
  • Thierry Madiès

    (Université de Fribourg)

  • Emmanuelle Taugourdeau

    (CNRS ; CREST ; University Paris-Saclay ; ENS Paris Saclay)

Abstract

Our paper presents a model of decentralized leadership with fiscal equalization and imperfect economic integration. The degree of trade integration (re ected by trade costs) turns out to have an effect on both the equilibrium tax rates across states and the ex-post vertical equalization transfers. Our main results are the following: Ex post vertical transfers are welfare deteriorating for low levels of trade integration while they are welfare improving compared to tax competition when trade integration is high enough. However, when public goods are highly valued by the citizens of the federation, ex post transfers are always welfare enhancing.

Suggested Citation

  • Thierry Madiès & Emmanuelle Taugourdeau, 2017. "Decentralized leadership in a federation and competition for mobile firms: Does economic integration matter?," Working Papers 2017-73, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2017-73
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    References listed on IDEAS

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    More about this item

    Keywords

    Tax competition; Trade Integration; Decentralized Leadership;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • F15 - International Economics - - Trade - - - Economic Integration

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