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Tiebout with politics: Capital tax competition and constitutional choices

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Abstract

This paper examines how capital tax competition affects jurisdiction formation. We describe a non-cooperative locational model of public goods provision choices, where the levels of taxation and the local public good varieties provided within jurisdictions are selected by majority voting, and where equilibrium jurisdictions consist of consumers with similar tastes. We show that inter-jurisdictional tax competition results in an enlargement of jurisdictional boundaries, and, even in the absence of intrajurisdictional transfers, can raise welfare for all members of a jurisdiction

Topics: HC
Publisher: REVIEW OF ECONOMIC STUDIES LTD
OAI identifier: oai:wrap.warwick.ac.uk:12356
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