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Tax competition and equalization: the impact of voluntary cooperation on the efficiency goal

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  • Petra Ens

    (Georg-August-Universität Göttingen)

Abstract

Literature has long learned about the welfare improving effect of equalization in tax competition environments. By setting incentives to local authorities, public spending becomes efficient in spite of relying on a mobile resource as the tax base. This paper proves that this result cannot hold when local players have influence on the shape of the transfer system. A bargaining concerning equalization may change the incentives arising from equalization.

Suggested Citation

  • Petra Ens, 2009. "Tax competition and equalization: the impact of voluntary cooperation on the efficiency goal," Working Papers 2009/16, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2009-16
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    References listed on IDEAS

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    More about this item

    Keywords

    tax competition; fiscal equalization; nash bargaining; cooperation;
    All these keywords.

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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