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

Author

Listed:
  • Thierry MADIÈS

    (Université de Fribourg)

  • Emmanuelle TAUGOURDEAU

    (CREST, University of 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 (reflected by trade costs) turns out to have ane effect on both the state tax rates 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, 2019. "Decentralized leadership in a federation with competition for mobile firms: Does economic integration matter?," Working Papers 2019-24, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2019-24
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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
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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