Bulletin n. 0/2004
December 2004
CONTENTS
  • Section A) The theory and practise of the federal states and multi-level systems of government
  • Section B) Global governance and international organizations
  • Section C) Regional integration processes
  • Section D) Federalism as a political idea
    • Keen Michael J., Kotsogiannis Christos
    Tax competition in federations and the welfare consequences of decentralization
    in Journal of Urban Economics , Volume 56, Issue 3 ,  2004 ,  397-407
    This paper explores the impact of intensified tax competition within federal systems characterized by the presence of both horizontal tax externalities between the states and vertical tax externalities between states and federal government. It shows that although these push tax rates in opposite directions (horizontal towards state taxes that are too low, vertical towards state taxes that are too high), leaving the net outcome unclear, intensified tax competition always worsens their combined effect. That is, intensified lower-level tax competition—in the form of an increase in the number of lower-level jurisdictions—is sure to reduce welfare, but this is not because, as usually supposed, it makes excessively low state taxes even lower; rather, it is welfare-reducing either for that reason or because it makes excessively high state taxes even higher.
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