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Tax versus Transfer Competition

Author

Listed:
  • Hindriks, J.

Abstract

In a context where both the poor and the rich are (imperfectly) mobile, this paper compares the Nash equilibrium levels of income redistribution from the rich to the poor when jurisdictions compete either in taxes, in transfers or both. Although taxes and transfers are linked through the budget-balanced requirement, the analysis reveals intriguing differences. Indeed, it turns out that transfer competition results in much less redistribution than tax competition, while tax-transfer competition involves an intermediate level of redistribution. In each approach, the mobility of the rich is detrimental to redistribution and an increase in the dependency ratio reduces taxes.

Suggested Citation

  • Hindriks, J., 1998. "Tax versus Transfer Competition," Discussion Papers 9808, Exeter University, Department of Economics.
  • Handle: RePEc:exe:wpaper:9808
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    Citations

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    Cited by:

    1. Jean Hindriks & Gareth D. Myles, 2003. "Strategic Inter-Regional Transfers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 229-248, April.
    2. FIGUIÈRES, Charles & HINDRIKS, Jean & MYLES, Gareth D., 2001. "Revenue sharing versus expenditure sharing," CORE Discussion Papers 2001015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. DREZE, Jacques H. & FIGUIERES, Charles & HINDRIKS, Jean, 2006. "Voluntary matching grants can forestall social dumping," CORE Discussion Papers 2006111, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Figuieres, Charles & Hindriks, Jean, 2002. "Matching grants and Ricardian equivalence," Journal of Urban Economics, Elsevier, vol. 52(1), pages 177-191, July.
    5. Gareth D. MYLES, 2006. "Tax policy and European Union governance," Departmental Working Papers 2006-10, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

    More about this item

    Keywords

    TAXES ; COMPETITION ; INCOME DISTRIBUTION ; SOCIAL INEQUALITY;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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