Efficient Regional Taxes in the Presence of Mobile Creative Capital

Amitrajeet Batabyal and Peter Nijkamp

MPRA Paper from University Library of Munich, Germany

Abstract: We study interregional competition for mobile creative capital between regions A and B. Regional authorities (RAs) in both regions use tax policy to attract the creative capital possessing members of the creative class to their region. The resulting tax revenues help RAs finance other objectives such as the provision of one or more public goods. In this setting, we accomplish five tasks. First, we explain the significance of a parameter ζ that is related to the marginal product of creative capital. Second, we compute the Nash equilibrium tax rates when each RA chooses its tax rate to maximize tax revenue. Third, we discuss how a decline in ζ affects the Nash equilibrium tax rates. Fourth, we determine the two efficient tax rates. Finally, we discuss the implications of our analysis for a policy that raises revenue by taxing creative capital.

Keywords: Competition; Creative Capital; Efficiency; Mobility; Tax Revenue (search for similar items in EconPapers)
JEL-codes: H20 R11 R50 (search for similar items in EconPapers)
Date: 2021-11-13, Revised 2022-01-06
New Economics Papers: this item is included in nep-geo, nep-gth, nep-pbe, nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Efficient Regional Taxes in the Presence of Mobile Creative Capital (2022)
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