Tax competition reconsidered
Wooders, Myrna Holtz, Zissimos, Ben and Dhillon, Amrita (2001) Tax competition reconsidered. [Coventry]: University of Warwick, Department of Economics. (Warwick economic research papers).
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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.
|Subjects:||H Social Sciences > HC Economic History and Conditions|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Taxation, Game theory|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||[Coventry]|
|Official Date:||December 2001|
|Number of Pages:||58|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Funder:||Economic and Social Research Council (Great Britain) (ESRC)|
|Version or Related Resource:||Wooders, M., Zissimos, B. and Dhillon, A. (2001). Tax competition reconsidered. Journal of Public Economic Theory, 9(3), pp.391-423.|
Askenazy, P. and le Van, C. (1999). A Model of optimal growth strategy. Journal of Economic Theory, March, 85(1), pp. 24-51.
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