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Tax-Price Competition for Internationalized Public Goods

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  • Tatsuaki Kuroda

Abstract

According to globalization, certain kinds of public goods, which used to be working as the goods just in a national economy, are getting internationalized or released for foreigners as well. In addition, those goods often exhibit differentiated features for a certain degree. The goods as such are therefore quite different by nature from the international collective or public goods in the literature. We explore the financing scheme for such kind of internationalized public goods, by a simple model of two countries competing each other with taxing and pricing. Our main results are; 1) The more populated the foreign country, the better off the home country if the degree of product differentiation is sufficiently high, or the foreign is sufficiently populated. Otherwise it may not; 2) While it is distorted by the governmental incentives to utilize foreigners as financial resources, the welfare in a Nash equilibrium is always better than that gained by autarky for any relative size of population and for any degree of differentiation; 3) While, in standard theory of game or oligopoly, more limited strategies for players tend to provide better off in equilibrium as a paradoxical consequence, discriminatory-pricing equilibrium here is better off for sufficiently larger country rather than more limited, uniform pricing scheme

Suggested Citation

  • Tatsuaki Kuroda, 2004. "Tax-Price Competition for Internationalized Public Goods," Econometric Society 2004 Far Eastern Meetings 443, Econometric Society.
  • Handle: RePEc:ecm:feam04:443
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    Keywords

    fiscal competition; country size; product differentiation;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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