IDEAS home Printed from https://ideas.repec.org/a/kap/itaxpf/v9y2002i2p121-141.html
   My bibliography  Save this article

Interjurisdictional Tax Competition in a Federal System of Overlapping Revenue Maximizing Governments

Author

Listed:
  • Laurent Flochel
  • Thierry Madies

Abstract

Academic literature in public finance has focused on interjurisdictional tax competition—namely among similar types of local governments—but has leaved vertical externalities arising from interactions between two overlapping governments sharing the same tax base aside. The purpose of this paper is to provide a simple model within which interjurisdictional tax competition and vertical interactions between two overlapping governments that share the same tax base can be analyzed simultaneously. We find that interjurisdictional tax competition reduces the global tax rate set by both overlapping governments (federal and local) but is unable to solve completely the distortion arising from vertical externalities. The model is also extended to allow for government subsidies to industrial capital. We give sufficient conditions for capital subsidies to be more efficient to attract capital when they are granted at a federal level rather than at a local level. Copyright Kluwer Academic Publishers 2002

Suggested Citation

  • Laurent Flochel & Thierry Madies, 2002. "Interjurisdictional Tax Competition in a Federal System of Overlapping Revenue Maximizing Governments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(2), pages 121-141, March.
    • Handle: RePEc:kap:itaxpf:v:9:y:2002:i:2:p:121-141
    DOI: 10.1023/A:1014695219494
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1023/A:1014695219494
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1023/A:1014695219494?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Oates, Wallace E, 1985. "Searching for Leviathan: An Empirical Study," American Economic Review, American Economic Association, vol. 75(4), pages 748-757, September.
    2. Zax, Jeffrey S, 1989. "Is There a Leviathan in Your Neighborhood?," American Economic Review, American Economic Association, vol. 79(3), pages 560-567, June.
    3. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922, November.
    4. Beck, John H., 1993. "Tax abatement and tax rates in a system of overlapping revenue-maximizing governments," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 645-665, November.
    5. Goodspeed, Timothy J., 2000. "Tax structure in a federation," Journal of Public Economics, Elsevier, vol. 75(3), pages 493-506, March.
    6. Forbes, Kevin F & Zampelli, Ernest M, 1989. "Is Leviathan a Mythical Beast?," American Economic Review, American Economic Association, vol. 79(3), pages 568-577, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. William Hoyt, 2005. "The Assignment and Division of the Tax Base in a System of Hierarchical Governments," Working Papers 2005-07, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
    2. Florence Lachet-Touya, 2013. "Tax Interactions with Asymmetric Information and Nonlinear Instruments," Working Papers hal-02945285, HAL.
    3. William H. Hoyt, 2017. "The assignment and division of the tax base in a system of hierarchical governments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(4), pages 678-704, August.
    4. Florence TOUYA, 2009. "Tax Interactions with Asymmetric Information and Nonlinear Instruments," Working Papers 9, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Nov 2009.
    5. Willi Leibfritz & Paul O'Brien, 2005. "The French Tax System: Main Characteristics, Recent Developments and Some Considerations for Reform," OECD Economics Department Working Papers 439, OECD Publishing.
    6. Grazzini Lisa & Petretto Alessandro, 2015. "Federalism with Bicameralism," German Economic Review, De Gruyter, vol. 16(2), pages 138-160, May.
    7. Florence Lachet-Touya, 2013. "Tax Interactions with Asymmetric Information and Nonlinear Instruments," Working papers of CATT hal-02945285, HAL.
    8. Florence Lachet-Touya, 2009. "Tax Interactions with Asymmetric Information and Nonlinear Instruments," Working papers of CATT hal-03551027, HAL.
    9. Florence Lachet-Touya, 2016. "EU tax competition and tax avoidance: A multiprincipal perspective," Working papers of CATT hal-02939340, HAL.
    10. Alexander Libman, 2012. "Sub-national political regimes and asymmetric fiscal decentralization," Constitutional Political Economy, Springer, vol. 23(4), pages 302-336, December.
    11. Vasilyeva, Olga & Libman, Alexander, 2020. "Varieties of authoritarianism matter: Elite fragmentation, natural resources and economic growth," European Journal of Political Economy, Elsevier, vol. 63(C).
    12. Florence Lachet-Touya, 2016. "EU tax competition and tax avoidance: A multiprincipal perspective," Working Papers hal-02939340, HAL.
    13. Florence Lachet-Touya, 2009. "Tax Interactions with Asymmetric Information and Nonlinear Instruments," Working Papers hal-03551027, HAL.
    14. Jonathan Klick & Francesco Parisi, 2005. "Intra-Jurisdictional Tax Competition," Constitutional Political Economy, Springer, vol. 16(4), pages 387-395, December.
    15. Florence Lachet-Touya, 2016. "Horizontal and Vertical Tax Interactions in a Common Agency Game," Working papers of CATT hal-02939399, HAL.
    16. Florence TOUYA, 2016. "Horizontal and Vertical Tax Interactions in a Common Agency Game," Working Papers 2015-2016_12, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2016.
    17. Florence TOUYA, 2016. "EU tax competition and tax avoidance: A multiprincipal perspective," Working Papers 2015-2016_11, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2016.
    18. Michael Keen & Christos Kotsogiannis, 2003. "Leviathan and Capital Tax Competition in Federations," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 177-199, April.
    19. Florence TOUYA, 2013. "Tax Interactions with Asymmetric Information and Nonlinear Instruments," Working Papers 2012-2013_9, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Jul 2013.
    20. Florence Lachet-Touya, 2016. "Horizontal and Vertical Tax Interactions in a Common Agency Game," Working Papers hal-02939399, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Russell S. Sobel, 1997. "Optimal Taxation in a Federal System of Governments," Southern Economic Journal, John Wiley & Sons, vol. 64(2), pages 468-485, October.
    2. George Crowley & Russell Sobel, 2011. "Does fiscal decentralization constrain Leviathan? New evidence from local property tax competition," Public Choice, Springer, vol. 149(1), pages 5-30, October.
    3. Brulhart, Marius & Jametti, Mario, 2006. "Vertical versus horizontal tax externalities: An empirical test," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 2027-2062, November.
    4. Madiès, Thierry, 2001. "Fiscalité superposée et externalités fiscales verticales : faut-il reconsidérer le débat entre concurrence et coopération fiscales?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(4), pages 593-612, décembre.
    5. Reingewertz, Yaniv, 2014. "Fiscal Decentralization - a Survey of the Empirical Literature," MPRA Paper 59889, University Library of Munich, Germany.
    6. Dean Stansel, 2006. "Interjurisdictional Competition and Local Government Spending in U.S. Metropolitan Areas," Public Finance Review, , vol. 34(2), pages 173-194, March.
    7. Jürgen, Göbel, 2009. "How can the Power of Leviathans be Measured?," MPRA Paper 13663, University Library of Munich, Germany.
    8. Gebhard Kirchgassner, 2002. "The effects of fiscal institutions on public finance: a survey of the empirical evidence," Chapters, in: Stanley L. Winer & Hirofumi Shibata (ed.), Political Economy and Public Finance, chapter 9, Edward Elgar Publishing.
    9. Jorge Martinez-Vazquez & Ming-Hung Yao, 2009. "Fiscal Decentralization and Public Sector Employment," Public Finance Review, , vol. 37(5), pages 539-571, September.
    10. Lars P. Feld & Gebhard Kirchgässner & Christoph A. Schaltegger, 2010. "Decentralized Taxation and the Size of Government: Evidence from Swiss State and Local Governments," Southern Economic Journal, John Wiley & Sons, vol. 77(1), pages 27-48, July.
    11. Michael Keen & Christos Kotsogiannis, 2003. "Leviathan and Capital Tax Competition in Federations," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 177-199, April.
    12. Lars Feld, 2014. "James Buchanan’s theory of federalism: from fiscal equity to the ideal political order," Constitutional Political Economy, Springer, vol. 25(3), pages 231-252, September.
    13. Hoyt, William H., 1999. "Leviathan, local government expenditures, and capitalization," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 155-171, March.
    14. Leonardo Letelier, 1993. "La Teoría del Federalismo Fiscal y su Relevancia en el Caso Municipal Chileno," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 30(90), pages 199-224.
    15. George R. Crowley, 2015. "Local Intergovernmental Competition and the Law of 1/n," Southern Economic Journal, John Wiley & Sons, vol. 81(3), pages 742-768, January.
    16. Dean Stansel, 2012. "Competition, knowledge, and local government," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(3), pages 243-253, September.
    17. Paolo Liberati & Agnese Sacchi, 2013. "Tax decentralization and local government size," Public Choice, Springer, vol. 157(1), pages 183-205, October.
    18. Kangsik, Choi, 2009. "Privatization, Government's Preference and Unionization Structure: A Mixed Oligopoly Approach," MPRA Paper 13028, University Library of Munich, Germany.
    19. Rexford E. Santerre, 1991. "Leviathan or Median-Voter: Who Runs City Hall?," Eastern Economic Journal, Eastern Economic Association, vol. 17(1), pages 5-14, Jan-Mar.
    20. Keith Dowding & Peter John & Stephen Biggs, 1994. "Tiebout : A Survey of the Empirical Literature," Urban Studies, Urban Studies Journal Limited, vol. 31(4-5), pages 767-797, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:9:y:2002:i:2:p:121-141. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.