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State Tax and Policy Competition For Mobile Capital

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  • Jeffrey D. Petchey
  • Perry Shapiro

Abstract

We characterise a model in which states engage in tax and policy competition with one another to attract mobile capital. The mix of policies chosen is shown to depend on the interaction between a desire to exploit capital for the benefit of domestic residents (labour) and a net marginal externality generated by capital. It is also argued that competition between states leads to an inefficient supply and geographical distribution of capital within the domestic economy if capital markets are not fully integrated.

Suggested Citation

  • Jeffrey D. Petchey & Perry Shapiro, 2002. "State Tax and Policy Competition For Mobile Capital," The Economic Record, The Economic Society of Australia, vol. 78(241), pages 175-185, June.
    • Handle: RePEc:bla:ecorec:v:78:y:2002:i:241:p:175-185
    DOI: 10.1111/1475-4932.00049
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    Cited by:

    1. Mark Partridge & Dan Rickman, 2010. "Computable General Equilibrium (CGE) Modelling for Regional Economic Development Analysis," Regional Studies, Taylor & Francis Journals, vol. 44(10), pages 1311-1328.
    2. Petchey, Jeffrey D. & Shapiro, Perry, 2009. "Equilibrium in fiscal competition games from the point of view of the dual," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 97-108, January.
    3. Nicolaas Groenewold & A.J. Hagger, 2004. "Regional Unemployment Disparities: Can Fiscal Policy Help?," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(1), pages 13-37, March.
    4. Satoshi Kasamatsu & Hikaru Ogawa, 2020. "International capital market and repeated tax competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 751-768, June.
    5. Jeff Petchey & Sophia Levtchenkova, 2004. "Fiscal Capacity Equalization and Economic Efficiency," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0415, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    6. Nicolaas Groenewold & Alfred Hagger, 2007. "Regional Unemployment Disparities: An Evaluation of Policy Measures," Economics Discussion / Working Papers 07-05, The University of Western Australia, Department of Economics.

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