IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Tax Competition Reconsidered

  • Wooders, Myrna
  • Zissimos, Ben
  • Dhillon, Amrita

In a classic model of tax competition, we show that the level of public good provision and taxation in a Nash equilibrium can be efficient or inefficient with either too much, or too little public good provision. The key is whether there exists a unilateral incentive to deviate from the efficient state and, if so, whether this entails raising or lowering taxes. A priori, there is no reason to suppose the incentive is in either one direction or the other. In addition, we demonstrate conditions ensuring existence of an asymmetric Nash equilibrium with efficient public good provision. As in prior literature, local amenities enhance capital’s productivity. Prior literature, however, focuses on under-provision of public goods.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp622.pdf
Download Restriction: no

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 622.

as
in new window

Length: 57 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:wrk:warwec:622
Contact details of provider: Postal: CV4 7AL COVENTRY
Phone: +44 (0) 2476 523202
Fax: +44 (0) 2476 523032
Web page: http://www2.warwick.ac.uk/fac/soc/economics/

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.:

as in new window
  1. Mintz, Jack & Smart, Michael, 2004. "Income shifting, investment, and tax competition: theory and evidence from provincial taxation in Canada," Journal of Public Economics, Elsevier, vol. 88(6), pages 1149-1168, June.
  2. Wilson, John Douglas, 1987. "Trade, Capital Mobility, and Tax Competition," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 835-56, August.
  3. Laussel, Didier & Le Breton, Michel, 1998. "Existence of Nash equilibria in fiscal competition models," Regional Science and Urban Economics, Elsevier, vol. 28(3), pages 283-296, May.
  4. Bayindir-Upmann, Thorsten & Ziad, Abderrahmanne, 2005. "Existence of equilibria in a basic tax-competition model," Regional Science and Urban Economics, Elsevier, vol. 35(1), pages 1-22, January.
  5. Askenazy, P. & Le Van, C., 1997. "A Model of Optimal Growth Strategy," DELTA Working Papers 97-27, DELTA (Ecole normale supérieure).
  6. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  7. Amrita Dhillon & Myrna H. Wooders & Ben Zissimos, 2006. "Tax Competition Reconsidered," Vanderbilt University Department of Economics Working Papers 0602, Vanderbilt University Department of Economics.
  8. MINTZ, Jacques & TULKENSÂ , Henry, 1994. "Optimality Properties of Alternative Systems of Taxation of Foreign Capital Income," CORE Discussion Papers 1994078, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
  10. Richard Baldwin; Paul Krugman, 2001. "Agglomeration, Integration and Tax Harmonization," IHEID Working Papers 01-2001, Economics Section, The Graduate Institute of International Studies.
  11. Black, Dan A & Hoyt, William H, 1989. "Bidding for Firms," American Economic Review, American Economic Association, vol. 79(5), pages 1249-56, December.
  12. Gerking, Shelby D. & Mutti, John H., 1981. "Possibilities for the exportation of production taxes : A general equilibrium analysis," Journal of Public Economics, Elsevier, vol. 16(2), pages 233-252, October.
  13. Roger H. Gordon, 1982. "An Optimal Taxation Approach to Fiscal Federalism," NBER Working Papers 1004, National Bureau of Economic Research, Inc.
  14. Timothy Besley & Anne Case, 1992. "Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition," NBER Working Papers 4041, National Bureau of Economic Research, Inc.
  15. Lockwood, B., 2000. "Tax Competition and Tax Co-Ordination Under Destination and Origin Principles: A Synthesis," The Warwick Economics Research Paper Series (TWERPS) 567, University of Warwick, Department of Economics.
  16. 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.
  17. Kar-yiu Wong & Ben Lockwood, 1997. "Specific and Ad Valorem Tariffs are not Equivalent in Trade Wars," Working Papers 0081, University of Washington, Department of Economics.
  18. Mintz, Jack & Tulkens, Henry, 1986. "Commodity tax competition between member states of a federation: equilibrium and efficiency," Journal of Public Economics, Elsevier, vol. 29(2), pages 133-172, March.
  19. Romer, Paul M, 1990. "Are Nonconvexities Important for Understanding Growth?," American Economic Review, American Economic Association, vol. 80(2), pages 97-103, May.
  20. Lockwood, Ben, 1993. "Commodity tax competition under destination and origin principles," Journal of Public Economics, Elsevier, vol. 52(2), pages 141-162, September.
  21. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  22. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  23. Paul Rothstein, 2007. "Discontinuous Payoffs, Shared Resources, and Games of Fiscal Competition: Existence of Pure Strategy Nash Equilibrium," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(2), pages 335-368, 04.
  24. 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).
  25. Amrita Dhillon & Carlo Perroni & Kimberley Scharf, 1997. "Implementing tax co-ordination," IFS Working Papers W97/12, Institute for Fiscal Studies.
  26. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-92, September.
  27. WILDASIN, David E., . "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).
  28. Wilson, John Douglas, 1991. "Tax competition with interregional differences in factor endowments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 423-451, November.
  29. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
  30. Jack High (ed.), 2001. "Competition," Books, Edward Elgar, number 1751, March.
  31. Thorsten Bayindir-Upmann, 1998. "Two Games of Interjurisdictional Competition When Local Governments Provide Industrial Public Goods," International Tax and Public Finance, Springer, vol. 5(4), pages 471-487, October.
  32. Dhillon, Amrita & Perroni, Carlo, 2001. "Tax earmarking and grass-roots accountability," Economics Letters, Elsevier, vol. 72(1), pages 99-106, July.
  33. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
  34. Noiset Luc, 1995. "Pigou, Tiebout, Property Taxation, and the Underprovision of Local Public Goods: Comment," Journal of Urban Economics, Elsevier, vol. 38(3), pages 312-316, November.
  35. 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)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wrk:warwec:622. 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: (Helen Neal)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.