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Research on Local Public Economics : with Focus on Capital Tax Competition

Research Project

Project/Area Number 18530247
Research Category

Grant-in-Aid for Scientific Research (C)

Allocation TypeSingle-year Grants
Section一般
Research Field Public finance/Monetary economics
Research InstitutionRitsumeikan University

Principal Investigator

MATSUMOTO Mutsumi  Ritsumeikan University, College of Economics, Professor (00253766)

Project Period (FY) 2006 – 2007
Project Status Completed (Fiscal Year 2007)
Budget Amount *help
¥1,550,000 (Direct Cost: ¥1,400,000、Indirect Cost: ¥150,000)
Fiscal Year 2007: ¥650,000 (Direct Cost: ¥500,000、Indirect Cost: ¥150,000)
Fiscal Year 2006: ¥900,000 (Direct Cost: ¥900,000)
KeywordsIntergovernmental Competition / Capital Tax Competition / 資本税競争
Research Abstract

During the term of this subsidized project, I wrote two research papers :
(1) Entry in Tax Competition ; (2) Redistribution and Regional Development under Tax Competition.
(1) The purpose of (1) is an investigation of the consequence of tax competition when the number of competing regions is endogenous. The standard tax competition models such as Zodrow and Mieszkowski (the 1986, Journal of Urban Economics) have shown that tax rates and public expenditure levels are too low when a fixed number of regions compete for mobile tax bases. What (1) argues is that this standard argument goes through with endogenous region entry. To determine the number of regions that compete for business investment, a fixed cost of land development is introduced into the Zodrow-Mieszkowski model of public input provision. In this framework, it is shown that, starting from a symmetric equilibrium among "active" regions that compete for business investment, a uniform increase in the level of public input provisi … More on raises the aggregate income of all regions, implying that the provision level is inefficiently low in the equilibrium.
This paper is under review for publication in "International Tax and Public Finance". It was also reported at seminars held at Hyogo Prefecture University and Nagoya University, and at the annual meeting of the Japanese association of public finance in 2007 (at Meiji University).
(2) Regional development policies are used as a means of regional redistribution in many countries and states, even if direct transfers are available for this purpose. In (2), a possible explanation for this policy practice is provided in terms of distorting tax competition. Specifically, the paper considers how capital tax competition affects transfer and development policies in the presence of regional income disparity. In each country, development policies determine the number of rich (poor) regions that (do not) engage in production activities, while transfer policies redistribute income between rich and poor regions. The mix of transfer and development policies is inefficient under tax competition: conditional on the equilibrium tax rate, too much revenue is spent on development policies and too little on transfer policies. This analysis of the expenditure mix implies that when allocating a given tax revenue for regional redistribution, competing countries attach too much importance to reducing the number of poor regions through development policies, rather than transferring income from rich to poor regions. Moreover, it is shown that the overall level of public expenditure may be too high because of the possibility of over-development. Under the present specification of development policies, the standard under-provision result does not necessarily hold.
I reported this paper at the seminars held at Ritsumeikan University, Nagoya University and Kyoto University. The paper was accepted for publication in the Journal of Urban Economics on 5 May 2008 (doi: 10.1016/j.jue.2008.05.002). From 9 May, it is available online in the Elsevier Homepage. Less

Report

(3 results)
  • 2007 Annual Research Report   Final Research Report Summary
  • 2006 Annual Research Report
  • Research Products

    (5 results)

All 2008 2007 2006

All Journal Article (3 results) Presentation (2 results)

  • [Journal Article] Redistribution and Regional Development under Tax Competition2008

    • Author(s)
      Mutsumi Matsumoto.
    • Journal Title

      Journal of Urban Economics(2008) doi : 10. 1016/j.jue

    • Description
      「研究成果報告書概要(欧文)」より
    • Related Report
      2007 Final Research Report Summary
  • [Journal Article] 政府間税競争の理論:資本税競争を中心として2006

    • Author(s)
      松本 睦
    • Journal Title

      フィナンシャルレビュー(財務省) 82巻3号

      Pages: 37-78

    • Description
      「研究成果報告書概要(和文)」より
    • Related Report
      2007 Final Research Report Summary
  • [Journal Article] 政府間税競争の理論 : 資本税競争を中心として2006

    • Author(s)
      松本 睦
    • Journal Title

      フィナンシャルレビュー 第82巻3号

      Pages: 37-78

    • Related Report
      2006 Annual Research Report
  • [Presentation] Entry in tax competition2007

    • Author(s)
      松本 睦
    • Organizer
      日本財政学会
    • Place of Presentation
      明治大学
    • Year and Date
      2007-10-26
    • Description
      「研究成果報告書概要(和文)」より
    • Related Report
      2007 Final Research Report Summary
  • [Presentation] Entry in Tax Competition2007

    • Author(s)
      Mutsumi Matsumoto.
    • Organizer
      Japanese association of Public Finance
    • Year and Date
      2007-10-26
    • Description
      「研究成果報告書概要(欧文)」より
    • Related Report
      2007 Final Research Report Summary

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Published: 2006-04-01   Modified: 2016-04-21  

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