 Endogenizing leadership and tax competition: Externalities and public good provisionThomas Eichner Regional Science and Urban Economics, 2014, vol. 46, issue C, 18-26 Abstract: This paper analyzes the issue of leadership when two jurisdictions are engaged in tax competition and capital tax revenues are used to finance the provision of local public goods. For that purpose we consider a timing game between the two asymmetric jurisdictions. On the first stage jurisdictions decide to move early or late and on the second stage they choose their tax rates. If jurisdictions differ with respect to population sizes or with respect to preferences for public goods, the Subgame perfect equilibria (SPE) are the two sequential Stackelberg outcomes. If jurisdictions differ with respect to productivities or with respect to capital endowments, the SPE are (i) the two sequential Stackelberg outcomes, (ii) the simultaneous Nash outcome at which both jurisdictions move early or (iii) the single sequential Stackelberg outcome at which the more productive or capital-poorer jurisdiction leads. The differences between the SPE (i)–(iii) are explained with the help of the externalities caused by the jurisdictions' tax rates. Keywords: Endogenous timing; Tax competition; Externality; Stackelberg (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:46:y:2014:i:c:p:18-26 DOI: 10.1016/j.regsciurbeco.2014.01.006 Access Statistics for this article Regional Science and Urban Economics is currently edited by D.P McMillen and Y. Zenou More articles in Regional Science and Urban Economics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.