Interjurisdictional tax competition, provision of two local public goods, and environmental policy

Upmann T (1995) Center for Mathematical Economics Working Papers; 238.
Bielefeld: Center for Mathematical Economics.

Diskussionspapier | Veröffentlicht | Englisch
 
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Upmann, Thorsten
Abstract / Bemerkung
This paper provides a model that integrates interjurisdictional tax competition and environmental policy. Each local government supplies two public goods - that benefit the local industry and the residents respectively - which are financed through distortionary taxation on industrial capital and pollutant emissions. In contrast to traditional theory of tax competition, we find that overprovision of local public goods may emerge in equilibrium. Since emission taxes serve to finance public spendings, the supply of public goods and the environmental quality are closely related. In the special case of a small region that cannot affect the national after-tax return to capital, we have the striking new result that in equilibrium two different regimes can occur. Either we have underprovision of public goods and an inefficiently high environmental quality, or we have overprovision of public goods and a too low environmental quality. These inefficiencies persevere as long as the federal government is not entitled to apply deliberate taxation/subsidy schemes. Correspondingly, unless regions are perfectly identical, we cannot hope to overcome the efficiency problem by symmetrical cooperative solutions.
Stichworte
interjurisdictional tax competition; capital and emission taxation; efficient provision of public goods; environmental quality
Erscheinungsjahr
1995
Band
238
ISSN
0931-6558
Page URI
https://pub.uni-bielefeld.de/record/2909817

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Upmann T. Interjurisdictional tax competition, provision of two local public goods, and environmental policy. Center for Mathematical Economics Working Papers. Vol 238. Bielefeld: Center for Mathematical Economics; 1995.
Upmann, T. (1995). Interjurisdictional tax competition, provision of two local public goods, and environmental policy (Center for Mathematical Economics Working Papers, 238). Bielefeld: Center for Mathematical Economics.
Upmann, T. (1995). Interjurisdictional tax competition, provision of two local public goods, and environmental policy. Center for Mathematical Economics Working Papers, 238, Bielefeld: Center for Mathematical Economics.
Upmann, T., 1995. Interjurisdictional tax competition, provision of two local public goods, and environmental policy, Center for Mathematical Economics Working Papers, no.238, Bielefeld: Center for Mathematical Economics.
T. Upmann, Interjurisdictional tax competition, provision of two local public goods, and environmental policy, Center for Mathematical Economics Working Papers, vol. 238, Bielefeld: Center for Mathematical Economics, 1995.
Upmann, T.: Interjurisdictional tax competition, provision of two local public goods, and environmental policy. Center for Mathematical Economics Working Papers, 238. Center for Mathematical Economics, Bielefeld (1995).
Upmann, Thorsten. Interjurisdictional tax competition, provision of two local public goods, and environmental policy. Bielefeld: Center for Mathematical Economics, 1995. Center for Mathematical Economics Working Papers. 238.
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