Even Small Trade Costs Restore Efficiency in Tax Competition

Authors

  • Johannes Becker
  • Marco Runkel

DOI:

https://doi.org/10.24352/UB.OVGU-2018-441

Keywords:

Tax Competition, Public Goods Provision, Trade

Abstract

We introduce transport cost of trade in products into the classical Zodrow and Mieszkowski (1986) model of capital tax competition. It turns out that even small levels of transport cost lead to a complete breakdown of the seminal result, the underprovision of public goods. Instead, there is a symmetric equilibrium with efficient public goods provision in all jurisdictions.

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Published

2018-09-05

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Section

Artikel