Tax competition and revelation of preferences for public expenditure
(1998) Journal of Urban Economics — Vol. 44, n° 3, p. 367-390 (1998)
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- Abstract
- This paper considers a federal country composed of local jurisdictions that differ in their inhabitants' tastes for public goods, and which finance local public expenditure through a source-based tax on capital income. The taste for public goods is the private information of local governments. The central government seeks an optimal policy, in which grants to local governments are conditioned on local tax rates. The uninformed central government seeks both to allocate capital efficiently among jurisdictions, and to induce jurisdictions to provide an efficient mix of private and public consumption. It is shown that there persist at this constrained optimum both some misallocation of capital and some violation of the Samuelson rule for optimal public good provision in every jurisdiction. (C) 1998 Academic Press.
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Bucovetsky, S., Marchand, M., & Pestieau, P. (1998). Tax competition and revelation of preferences for public expenditure. Journal of Urban Economics, 44(3), 367-390. https://doi.org/10.1006/juec.1997.2075 (Original work published 1998)