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Mergers in Fiscal Federalism

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  • Breuillé, Marie-Laure
  • Zanaj, Skerdilajda

Abstract

We analyze how the merger of regions affects capital tax competition in a two-tier territorial organization where both regions and cities share the same mobile tax base. We identify three effects generated by the merger of regions that impact, either directly or indirectly, both regional and local tax choices: i) an alleviation of tax competition at the regional level, ii) a scale effect in the provision of regional public goods, and iii) a larger internalization of vertical tax externalities generated by cities. We show that the merger of regions always increases regional tax rates while decreasing local tax rates. These results are robust to a change in the timing of the game.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Breuillé, Marie-Laure & Zanaj, Skerdilajda, 2010. "Mergers in Fiscal Federalism," CCES Discussion Paper Series 37, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
    • Handle: RePEc:hit:ccesdp:37
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    References listed on IDEAS

    as
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    1. Mergers and tax competition
      by Economic Logician in Economic Logic on 2010-11-19 21:05:00

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    Cited by:

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    2. Bhattarai, Keshab, 2015. "Constitution, Institutions and A Model for Economic Development in Nepal," MPRA Paper 93261, University Library of Munich, Germany, revised 08 Apr 2019.
    3. Lionel WILNER, 2020. "How do citizens perceive centralization reforms? Evidence from the merger of French regions," Working Papers 2020-20, Center for Research in Economics and Statistics, revised 07 Jun 2021.
    4. Brülhart, Marius & Bucovetsky, Sam & Schmidheiny, Kurt, 2015. "Taxes in Cities," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1123-1196, Elsevier.
    5. Jiancai Pi & Kaiqi Zhang & Xiangyu Huang, 2023. "Financial globalization and wage inequality," Scottish Journal of Political Economy, Scottish Economic Society, vol. 70(2), pages 144-157, May.
    6. Tamai, Toshiki, 2022. "Tax competition versus tax coordination in a multi-region endogenous growth model with an integrated capital market," Economic Modelling, Elsevier, vol. 114(C).
    7. 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.
    8. Siggelkow, Benjamin Florian, 2018. "Tax competition and the implications of national tax policy coordination in the presence of fiscal federalism," Regional Science and Urban Economics, Elsevier, vol. 73(C), pages 17-29.
    9. David R. Agrawal & Jan K. Brueckner & Marius Brülhart, 2024. "Fiscal Federalism in the 21st Century," CESifo Working Paper Series 10951, CESifo.

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    More about this item

    Keywords

    Mergers; Tax Competition; Fiscal Federalism;
    All these keywords.

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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