Fiscal Competition and the Pattern of Public Spending

Michael Keen and Maurice Marchand
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Maurice Marchand: Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium

No 1996001, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Much attention has been given to the impact of fiscal competition on the level of public expenditure, but relatively little to the impact on its composition. Using a broadly familiar and reasonably rich model of fiscal competition in the presence of mobile capital, this paper establishes a systematic bias in public spending patterns: starting from the non-cooperative equilibrium, and holding tax rates constant, welfare would be improved by a coordinated reduction in the provision of local public inputs and a corresponding increase in the public provision of local public goods benefiting immobile consumers.

Date: 1996-02-01
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Related works:
Journal Article: Fiscal competition and the pattern of public spending (1997)
Working Paper: Fiscal competition and the pattern of public spending (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1996001

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