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A Note on the Composition of Public Expenditure under Capital Tax Competition

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  • Mutsumi Matsumoto

Abstract

Keen and Marchand ( Journalof Public Economics, 1997, 66, 33–53) argue that undercapital tax competition, the composition of public expenditureis inefficient in that too much is spent on public inputs benefitinglocal business and too little on public goods benefiting residents.Their result depends on labor immobility. This note shows thatthe Keen-Marchand argument may not hold if both labor and capitalare mobile. An interesting case is identified where capital taxationdoes not distort the mix of public goods and public inputs, eventhough the overall level of public expenditure is inefficientlylow. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Mutsumi Matsumoto, 2000. "A Note on the Composition of Public Expenditure under Capital Tax Competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(6), pages 691-697, December.
    • Handle: RePEc:kap:itaxpf:v:7:y:2000:i:6:p:691-697
    DOI: 10.1023/A:1008781410589
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    References listed on IDEAS

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    1. Russell Krelove, 1992. "Efficient Tax Exporting," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 145-155, February.
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