Even Small Trade Costs Restore Efficiency in Tax Competition
16 Pages Posted: 27 Oct 2010
Date Written: October 26, 2010
Abstract
We introduce transport cost of trade in products into the classical Zodrow and Mieszkowski (1986) model of capital tax competition. It turns out that even small levels of transport cost lead to a complete breakdown of the seminal result, the underprovision of public goods. Instead, there is a symmetric equilibrium with efficient public goods provision in all jurisdictions.
Keywords: tax competition, public goods provision, trade
JEL Classification: H25, F23
Suggested Citation: Suggested Citation
Becker, Johannes and Runkel, Marco, Even Small Trade Costs Restore Efficiency in Tax Competition (October 26, 2010). CESifo Working Paper Series No. 3221, Available at SSRN: https://ssrn.com/abstract=1697991 or http://dx.doi.org/10.2139/ssrn.1697991
Do you have negative results from your research you’d like to share?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.