Research on Local Public Economics : with Focus on Capital Tax Competition
| Project/Area Number |
18530247
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | Ritsumeikan University |
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Principal Investigator |
MATSUMOTO Mutsumi Ritsumeikan University, College of Economics, Professor (00253766)
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| Project Period (FY) |
2006 – 2007
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| Project Status |
Completed (Fiscal Year 2007)
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| 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)
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| Keywords | Intergovernmental Competition / Capital Tax Competition / 資本税競争 |
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| 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
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Report
(3 results)
Research Products
(5 results)
