Hotelling Tax Competition

Myrna Wooders and Benjamin Zissimos

No 269481, Economic Research Papers from University of Warwick - Department of Economics

Abstract: This paper shows how competition among governments for mobile firms can bring about excessive differentiation in levels of taxation and public good provision. Hotelling’s Principle of Minimum Differentiation is applied in the context of tax competition and shown to be invalid. Instead, when an equilibrium exists, differentiation of public good provision is maximized. Non-existence of equilibrium, which can occur, is a metaphor for intense tax competition. The paper also shows that, to some extent, perfect tax discrimination presents a solution to the existence problem created by Hotelling tax competition, but that the efficiency problem of Hotelling tax competition is exacerbated.

Keywords: Agricultural and Food Policy; Financial Economics (search for similar items in EconPapers)
Pages: 56
Date: 2003-03-03
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Hotelling Tax Competition (2003)
Working Paper: HOTELLING TAX COMPETITION (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269481

DOI: 10.22004/ag.econ.269481

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