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Preferences over Public Good, Political Delegation, and Leadership in Tax Competition

Rupayan Pal () and Ajay Sharma

Public Finance Review, 2019, vol. 47, issue 4, 718-746

Abstract: Leadership (sequential choice) and political delegation are two mechanisms suggested to restrict “race-to-the-bottom†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)
Date: 2019
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DOI: 10.1177/1091142118817901

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