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Even Small Trade Costs Restore Efficiency in Tax Competition

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Becker,  Johannes
Public Economics, MPI for Intellectual Property, Competition and Tax Law, Max Planck Society;

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1185214.pdf
(Preprint), 158KB

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Citation

Becker, J., & Runkel, M. (2010). Even Small Trade Costs Restore Efficiency in Tax Competition. CESifo Working Paper, Nr. 3221.


Cite as: http://hdl.handle.net/11858/00-001M-0000-0011-4DF5-1
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.