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Local Taxation, Private-Public Consumption Complementarity, and the Optimal Number of Jurisdictions

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  • Soldatos, Gerasimos T.

Abstract

Viewing local finances under the approach to private-public consumption complementarity, we conclude that foot voting and tax competition become extinct when the (capital) tax structure across jurisdictions is the one forging close ties between the burgher and his/her jurisdiction. Feeling the burgher attached to the local public goods offered and to the local business activity, prevents labor and capital relocation. The optimal number of jurisdictions is that which is conducive to the adoption of that local taxation that fosters such an attachment; taxation made possible by capitalizing upon private-public consumption complementarity. The intuitive appeal of this result is then contemplated within the broader framework of fiscal policymaking accommodative of citizen heterogeneity. In view of complementarity, there appears to be scope for decentralized treatment of citizen preferences via the localities, leaving the treatment of endowment differences to the central government

Suggested Citation

  • Soldatos, Gerasimos T., 2014. "Local Taxation, Private-Public Consumption Complementarity, and the Optimal Number of Jurisdictions," MPRA Paper 60861, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:60861
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    References listed on IDEAS

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    More about this item

    Keywords

    Local taxation; Private-public consumption complementarity; Citizen heterogeneity; Burgher-community attachment;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H79 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other

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