Equalization Payments in a Bargaining Model of Tax Competition
A model in which a high-productivity region and a low-productivity region bargain with each firm in a group of mobile firms is constructed. It differs from the Han and Leach  model in that the firms are identical, so that its comparative statics are more tractable. The model is used to examine the allocative effects of equalization payments (both non-contingent payments and "corrective subsidies"). The equilibrium is characterized by misallocation of capital and underprovision of public goods. Underprovision is more severe in the low-productivity region than the high-productivity region. A transfer of revenue from the high-productivity region to the low-productivity region augments public goods provision in the low-productivity region, allowing that region to make more generous offers to the firms. Likewise, underprovsion becomes more severe in the high-productivity region, so that its offers become less generous. Equilibrium is attained by a movement of firms from the high-productivity region to the low-productivity region, reducing the misallocation of capital.
|Date of creation:||Jan 2008|
|Contact details of provider:|| Postal: 1280 Main Street West, Hamilton, Ontario, L8S 4M4|
Phone: (905) 525-9140 ext. 22765
Fax: (905) 521-8232
Web page: http://www.economics.mcmaster.ca/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Han, Seungjin & Leach, John, 2008.
"A bargaining model of tax competition,"
Journal of Public Economics,
Elsevier, vol. 92(5-6), pages 1122-1141, June.
- Han, Seungjin & Leach, John, 2005. "A Bargaining Model of Tax Competition," Microeconomics.ca working papers han-05-12-02-10-57-12, Vancouver School of Economics, revised 04 Dec 2007.
- Seungjin Han & John Leach, 2007. "A Bargaining Model of Tax Competition," Department of Economics Working Papers 2007-09, McMaster University.
- Wildasin, David E., 1989.
"Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy,"
Journal of Urban Economics,
Elsevier, vol. 25(2), pages 193-212, March.
- WILDASIN, David E., "undated". "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," CORE Discussion Papers RP 831, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Sam Bucovetsky & Michael Smart, 2006. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(1), pages 119-144, January.
- Sam Bucovetsky & Michael Smart, 2002. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," CESifo Working Paper Series 767, CESifo Group Munich.
- Chris Doyle & Sweder Wijnbergen, 1994. "Taxation of foreign multinationals: A sequential bargaining approach to tax holidays," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 1(3), pages 211-225, October.
- Doyle, Christopher & van Wijnbergen, Sweder, 1984. "Taxation of Foreign Multinationals: A Sequential Bargaining Approach to Tax Holidays," CEPR Discussion Papers 25, C.E.P.R. Discussion Papers.
- Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-633, November.
- DePeter James A. & Myers Gordon M., 1994. "Strategic Capital Tax Competition: A Pecuniary Externality and a Corrective Device," Journal of Urban Economics, Elsevier, vol. 36(1), pages 66-78, July.
- Marko Köthenbürger, 2002. "Tax Competition and Fiscal Equalization," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(4), pages 391-408, August.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(2), pages 269-304, June.
- Bond, Eric W & Samuelson, Larry, 1986. "Tax Holidays as Signals," American Economic Review, American Economic Association, vol. 76(4), pages 820-826, September.
- Ian King & R. Preston McAfee & Linda Welling, 1993. "Industrial Blackmail: Dynamic Tax Competition and Public Investment," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 590-608, August.
- Black, Dan A & Hoyt, William H, 1989. "Bidding for Firms," American Economic Review, American Economic Association, vol. 79(5), pages 1249-1256, December.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:mcm:deptwp:2008-01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.