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Two-dimensional fiscal competition

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  • Yoshiaki Ohsawa
  • Takeshi Koshizuka

Abstract

This paper analyses commodity tax competition between two neighboring countries whose governments are tax-revenue maximizers in a two-dimensional market. The results suggest three conclusions in a geographical sense. First, a small country sets a lower tax than does a big country, and per capita revenue of the small country is larger than that of the big country. Second, these two countries are subject to severer competitive pressure in the case of a more curved national border. Finally, the impact of border curvature on tax and revenue differences are always opposite in sign with the impact on tax and revenue ratios. Copyright 2003, Oxford University Press.

Suggested Citation

  • Yoshiaki Ohsawa & Takeshi Koshizuka, 2003. "Two-dimensional fiscal competition," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 275-287, July.
    • Handle: RePEc:oup:jecgeo:v:3:y:2003:i:3:p:275-287
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    Cited by:

    1. Aiura, Hiroshi & Ogawa, Hikaru, 2013. "Unit tax versus ad valorem tax: A tax competition model with cross-border shopping," Journal of Public Economics, Elsevier, vol. 105(C), pages 30-38.
    2. Agrawal, David R., 2016. "Local fiscal competition: An application to sales taxation with multiple federations," Journal of Urban Economics, Elsevier, vol. 91(C), pages 122-138.
    3. Xin Liu & Paul Madden, 2007. "Bigger Countries with Probably Lower Commodity Taxes," Economics Discussion Paper Series 0711, Economics, The University of Manchester.
    4. Xin Liu & Paul Madden, 2013. "Bigger Countries with Probably Lower Commodity Taxes," Studies in Microeconomics, , vol. 1(2), pages 173-183, December.

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