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Interregional Tax Competition and Intraregional Political Competition: The Optimal Provision of Public Goods

  • Toshihiro Ihori

    (Faculty of Economics, University of Tokyo)

  • C. C. Yang

    (Institute of Economics, Academia Sinica and Department of Public Finance, National Chengchi University)

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    This paper explores the implications of the interaction between interregional tax competition and intraregional political competition for the optimal provision of public goods. In contrast to Hoyt's (1991) finding that the extent to which public goods are undersupplied is monotonically increasing in the number of competing regions, we show that the relationship between the level of public good supply and the number of competing regions is nonmonotonic if political as well as tax competition is considered. Interestingly, some certain interaction between interregional tax competition and intraregional political competition can result in the optimal provision of public goods.

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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2008/2008cf553.pdf
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    Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-553.

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    Length: 24 pages
    Date of creation: Apr 2008
    Date of revision:
    Handle: RePEc:tky:fseres:2008cf553
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    1. Fuest, Clemens & Huber, Bernd, 2001. "Tax competition and tax coordination in a median voter model," Munich Reprints in Economics 20292, University of Munich, Department of Economics.
    2. Hoyt, William H., 1991. "Property taxation, Nash equilibrium, and market power," Journal of Urban Economics, Elsevier, vol. 30(1), pages 123-131, July.
    3. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
    4. Frey, Bruno S. & Eichenberger, Reiner, 1996. "To harmonize or to compete? That's not the question," Journal of Public Economics, Elsevier, vol. 60(3), pages 335-349, June.
    5. WILDASIN, David, . "Nash equilibria in models of fiscal competition," CORE Discussion Papers RP -804, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-89, March.
    7. Wilson, John Douglas, 2005. "Welfare-improving competition for mobile capital," Journal of Urban Economics, Elsevier, vol. 57(1), pages 1-18, January.
    8. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
    9. Fuest, Clemens & Huber, Bernd, 2001. " Tax Competition and Tax Coordination in a Median Voter Model," Public Choice, Springer, vol. 107(1-2), pages 97-113, April.
    10. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
    11. Rauscher, Michael, 1998. "Leviathan and Competition among Jurisdictions: The Case of Benefit Taxation," Journal of Urban Economics, Elsevier, vol. 44(1), pages 59-67, July.
    12. Persson, Torsten & Tabellini, Guido, 1992. "The Politics of 1992: Fiscal Policy and European Integration," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 689-701, October.
    13. Martin J. Osborne & Al Slivinksi, 1995. "A Model of Political Competition with Citizen-Candidates," Department of Economics Working Papers 1995-01, McMaster University.
    14. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
    15. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
    16. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
    17. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
    18. repec:cup:cbooks:9780521782760 is not listed on IDEAS
    19. repec:cup:cbooks:9780521630351 is not listed on IDEAS
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