Spillover Effects in a Federal Country with Vertical Tax Externalities

Lisa Grazzini and Alessandro Petretto ()

Working papers from Società Italiana di Economia Pubblica

Abstract: We analyse how spillover effects may affect the choice of a federal tax rate in a federal country with vertical tax externalities. Our main result shows under which conditions the federal tax rate with spillover effects is lower or higher than the federal tax rate without spillover effects. The standard result on inefficiently high tax rates due to vertical tax externalities can be modified by the reaction of the federal government to the horizontal externality due to spillover effects.

Keywords: fiscal federalism; median voter; positive spillovers (search for similar items in EconPapers)
JEL-codes: H41 H71 H77 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-mfd, nep-pbe, nep-pol and nep-ure
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Related works:
Journal Article: Spillover Effects in a Federal Country with Vertical Tax Externalities (2017)
Working Paper: Spillover Effects in a Federal Country with Vertical Tax Externalities (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ipu:wpaper:23

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