Tax Competition and the Determination of the Quality of Public Goods

Abstract : In this paper, the author analyzes the behavior of local governments in capital taxation when the financial choices in terms of the quality of public goods are made done by a central planner. More specifically, he asks the question of whether a local government has an interest in taxing the mobile factor in addition to the tax on representative households. Through a comparison of social welfare given the strategies chosen by local governments, the author shows that whatever the quality and cost of public goods, a local government always has an interest in taxing the mobile factor. This leads to a Nash equilibrium in the dominant strategy in their model. JEL D00 H20 H41 H70
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A.H. Ould Abdessalam, Eric Kamwa. Tax Competition and the Determination of the Quality of Public Goods. Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the world economy, 2014, 8 (2014-12), pp.2014 - 2026. ⟨10.5018/economics-ejournal.ja.2014-12⟩. ⟨hal-01757768⟩

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