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Interregional Tax Competition and Intraregional Political Competition: The Optimal Provision of Public Goods

Author

Listed:
  • Toshihiro Ihori

    (Faculty of Economics, University of Tokyo)

  • C. C. Yang

    (Institute of Economics, Academia Sinica and Department of Public Finance, National Chengchi University)

Abstract

This paper explores the implications of the interaction between interregional tax competition and intraregional political competition for the optimal provision of public goods. In contrast to Hoyt's (1991) finding that the extent to which public goods are undersupplied is monotonically increasing in the number of competing regions, we show that the relationship between the level of public good supply and the number of competing regions is nonmonotonic if political as well as tax competition is considered. Interestingly, some certain interaction between interregional tax competition and intraregional political competition can result in the optimal provision of public goods.

Suggested Citation

  • Toshihiro Ihori & C. C. Yang, 2008. "Interregional Tax Competition and Intraregional Political Competition: The Optimal Provision of Public Goods," CIRJE F-Series CIRJE-F-553, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2008cf553
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    References listed on IDEAS

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    1. Geys, Benny & Konrad, Kai A., . "Federalism and optimal allocation across levels of governance," Chapters in Economics,, University of Munich, Department of Economics.

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