Public Goods and Tax Competition in a Two-Sided Market

Christos Kotsogiannis and Konstantinos Serfes (ks346@drexel.edu)

No 808, Discussion Papers from University of Exeter, Department of Economics

Abstract: A rather neglected issue in the tax competition literature is the dependence of equilibrium outcomes on the presence of firms and shoppers (two-sided markets). Making use of a model of vertical and horizontal differentiation, within which jurisdictions compete by providing public goods and levying taxes in order to attract firms and shoppers, this paper characterizes the non-cooperative equilibrium. It also evaluates the welfare implications for the jurisdictions of a popular policy of tax coordination: The imposition of a minimum tax. It is shown that the interaction of the two markets affects the intensity of tax competition and the degree of optimal vertical differentiation chosen by the competing jurisdictions. Though the non-cooperative equilibrium is, as it is typically the case, inefficient such inefficiency is mitigated by the strength of the interaction in the two markets. A minimum tax policy is shown to be effective when the strength of the interaction is weak and ineffective when it is strong.

Keywords: Public goods; Tax competition; Two-Sided Market; Vertical Differentiation (search for similar items in EconPapers)
JEL-codes: D72 H77 (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations:

Downloads: (external link)
https://exetereconomics.github.io/RePEc/dpapers/DP0808.pdf (application/pdf)

Related works:
Journal Article: Public Goods and Tax Competition in a Two‐Sided Market (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:0808

Access Statistics for this paper

More papers in Discussion Papers from University of Exeter, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sebastian Kripfganz (s.kripfganz@exeter.ac.uk).