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Tax competition and revelation of preferences for public expenditure

Sam Bucovetsky (), Maurice Marchand and Pierre Pestieau ()
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Maurice Marchand: Center for Operations Research and Econometrics (CORE) and Institut d'Administration et de Gestion (IAG), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium

No 1997003, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper considers a federal country composed of local jurisdictions which differ in their taste for public goods and finance public spending by a source-based tax on capital income. The taste for public goods is private information of jurisdictions. By transferring differential grants to jurisdictions the central government aims at both reducing the misallocation of capital due to the diverging jurisdictional tax rates on capital income and getting closer to the optimal balance between private and public consumption in every jurisdiction. The purpose of the paper is to characterize the optimal grant policy of the central government. It is shown that there persist at the optimum both some misallocation of capital and some violation of the Samuelson rule in every jurisdiction.

Date: 1997-01-01
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Related works:
Journal Article: Tax Competition and Revelation of Preferences for Public Expenditure (1998) Downloads
Working Paper: Tax competition and revelation of preferences for public expenditure (1998) Downloads
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