How large are the welfare costs of tax competition?
نویسنده
چکیده
Competition among regional governments may lead to suboptimal levels of capital taxation, as governments ignore the external benefits of capital flight to other regions. However, there have been few attempts to quantify the magnitude of the resulting efficiency losses. This paper presents extensive calculations of the efficiency costs over a wide range of parameter scenarios and assumptions about government behavior, using various generalizations of Wildasin [Journal of Urban Economics 25 (1989) 193–213]. The efficiency costs tend to be fairly moderate under most (though not all) scenarios, and particularly when allowance is made for the possibility of Leviathan and noncompetitive government behavior. 2003 Elsevier Inc. All rights reserved. JEL classification: H73; H21; H23
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