Decentralization and International Tax Competition

John Wilson and Eckhard Janeba

No 854, CESifo Working Paper Series from CESifo

Abstract: This paper models tax competition between two countries that are divided into regions. In the first stage of the game, the strategy variable for each country is the division of the provision of a continuum of public goods between the central and regional governments. In the second stage, the central and regional governments choose their tax rates on capital. A country’s decentralization level serves as a strategic tool through its influence on the mix of horizontal and vertical externalities that exist under tax competition. In contrast to standard tax competition models, decentralizing the provision of public goods may be welfare-enhancing.

Date: 2003
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Citations: View citations in EconPapers (10)

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Journal Article: Decentralization and international tax competition (2005)
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