Public expenditure spillovers: an explanation for heterogeneous tax reaction functions

Rosella Levaggi and Paolo Panteghini

International Tax and Public Finance, 2021, vol. 28, issue 3, No 2, 497-514

Abstract: Abstract In this article, we show that spillovers may provide an alternative explanation for the heterogeneity of tax reaction functions under tax competition. In particular, we assume the existence of $$n\ge 2$$ n ≥ 2 jurisdictions, which compete to attract mobile capital in a context where public expenditure produces spillovers. We show that the latter can lead to asymmetric responses. For instance, jurisdiction i may react positively to a change in the tax rate of jurisdiction j and negatively to the change in jurisdiction z. From a policy point of view, these findings are helpful to understand the mixed results found by the empirical literature, and to analyse the tax reaction functions of city centres and suburban jurisdictions.

Keywords: Tax competition; Spillovers; Asymmetric reaction Functions (search for similar items in EconPapers)
JEL-codes: H2 H25 H4 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10797-020-09620-7 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Public Expenditure Spillovers: An Explanation for Heterogeneous Tax Reaction Functions (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:28:y:2021:i:3:d:10.1007_s10797-020-09620-7

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2

DOI: 10.1007/s10797-020-09620-7

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 ().