Preferences over Public Good, Political Delegation, and Leadership in Tax Competition
Rupayan Pal () and
Public Finance Review, 2019, vol. 47, issue 4, 718-746
Leadership (sequential choice) and political delegation are two mechanisms suggested to restrict â€œrace-to-the-bottomâ€ in tax competition. In this article, we analyze whether these two mechanisms when combined together would lead to unilaterally higher taxation or not. We show that political delegation with leadership in tax competition not only restricts race-to-the-bottom but also mitigates the possibility of overprovision of public good. In sequential choice game, only the follower region delegates taxation power to the policy maker but not the leader region. This puts a check on intensity of tax competition and restricts the under provision of public good.
Keywords: political delegation; foreign-owned mobile capital; sequential tax competition; public good provision; fiscal competition (search for similar items in EconPapers)
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Working Paper: Preferences over public good, political delegation and leadership in tax competition (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:47:y:2019:i:4:p:718-746
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