TY  - GEN
AB  - This paper provides a model that integrates interjurisdictional tax
competition and environmental policy. Each local government supplies two
public goods - that benefit the local industry and the residents
respectively - which are financed through distortionary taxation on
industrial capital and pollutant emissions. In contrast to traditional
theory of tax competition, we find that overprovision of local public
goods may emerge in equilibrium. Since emission taxes serve to finance
public spendings, the supply of public goods and the environmental
quality are closely related. In the special case of a small region that
cannot affect the national after-tax return to capital, we have the
striking new result that in equilibrium two different regimes can occur.
Either we have underprovision of public goods and an inefficiently high
environmental quality, or we have overprovision of public goods and a
too low environmental quality. These inefficiencies persevere as long as
the federal government is not entitled to apply deliberate
taxation/subsidy schemes. Correspondingly, unless regions are perfectly
identical, we cannot hope to overcome the efficiency problem by
symmetrical cooperative solutions.
DA  - 1995
KW  - interjurisdictional tax competition
KW  - capital and emission taxation
KW  - efficient provision of public goods
KW  - environmental quality
LA  - eng
PY  - 1995
SN  - 0931-6558
TI  - Interjurisdictional tax competition, provision of two local public goods, and environmental policy
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-29098172
Y2  - 2024-11-22T06:00:22
ER  -