Inter-jurisdictional fiscal competition

Sergio Guimarães Ferreira (), Ricardo Varsano () and José Roberto Afonso ()

Brazilian Journal of Political Economy, 2005, vol. 25, issue 3, 295-313

Abstract: This paper surveys the literature on fiscal competition. We consider tax and expenditure competition in a more general set up where different jurisdictions within a federation may compete in the provision of public goods in order to attract some residents (Tiebout (1956)) and expel others (Brueckner (1999); and/or for business. We address the vast literature on welfare gains or losses of these types of competition. Then, we discuss the empirical evidence, focusing on estimates of the sensitiveness of production factors to tax differentials and on the importance of the strategic interdependence among jurisdictions. We combine econometric studies with some case studies. Last we discuss the design of mechanisms to cope with fiscal competition, especially under a more global environment where factors become more mobile. JEL Classification: H77; H73; F2.

Keywords: Fiscal Federalism; Tax Differentials; Factor Mobility (search for similar items in EconPapers)
Date: 2005
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