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Preferences over public good, political delegation and leadership in tax competition

Rupayan Pal () and Ajay Sharma

MPRA Paper from University Library of Munich, Germany

Abstract: Leadership (sequential choice) and political delegation are two mechanisms suggested to restrict ‘race-to-the-bottom’ in tax competition. In this paper, we analyze whether these two mechanisms when combined together would lead to unilaterally higher taxation or not. We show that political delegation with leadership in tax competition not only restricts ‘race-to-the-bottom’ but also mitigates the possibility of over provision of public good. In sequential choice game, only the follower region delegates taxation power to the policy maker but not the leader region. This puts a check on intensity of tax competition and leads to optimal provision of public good.

Keywords: Political delegation; Foreign-owned mobile capital; Sequential tax competition; Public good provision; Fiscal competition (search for similar items in EconPapers)
JEL-codes: D7 F21 H25 H42 R5 (search for similar items in EconPapers)
Date: 2018-12-18
New Economics Papers: this item is included in nep-cdm and nep-pol
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Journal Article: Preferences over Public Good, Political Delegation, and Leadership in Tax Competition (2019) Downloads
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