Decentralization with porous borders: public production in a federation with tax competition and spillovers
Stephanie Armbruster () and
Beat Hintermann ()
Additional contact information
Stephanie Armbruster: Faculty of Business and Economics, University of Basel
International Tax and Public Finance, 2020, vol. 27, issue 3, No 6, 606-642
Abstract We analyze the strategic interaction of regional and federal governments using a model that includes fiscal externalities in the form of inter-regional capital tax competition and technical externalities in the form of inter-regional spillovers. The federal government aims to correct for these inefficiencies using a transfer system. If the regional governments are policy leaders (such that federal policy is set conditional on regional choices), they will internalize both fiscal and technical externalities but free-ride on the transfer system. Efficiency can be achieved by introducing a second transfer scheme that is independent of regional public production. If the federal government sets its policy first and can commit itself to it, the outcome is efficient only if matching grants are used that are financed outside of the transfer system.
Keywords: Fiscal federalism; Tax competition; Externalities; Spillovers; Commitment; Centralized leadership; Decentralized leadership (search for similar items in EconPapers)
JEL-codes: H21 H40 H77 Q58 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s10797-019-09572-7 Abstract (text/html)
Access to full text is restricted to subscribers.
Working Paper: Decentralization with porous borders: Public production in a federation with tax competition and spillovers (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:27:y:2020:i:3:d:10.1007_s10797-019-09572-7
Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2
Access Statistics for this article
International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf
More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().