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Tax Competition, Income Differentials and Local Public Services

Smith, E and Webb, T (2001) 'Tax Competition, Income Differentials and Local Public Services.' International Tax and Public Finance, 8 (5). 675 - 691. ISSN 0927-5940

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This paper examines strategic tax setting between fiscal authorities in the presence of mobile workers who locate across these jurisdictions in response to differing tax structures and congestable local public amenities. We find that the nature of the tax setting outcomes depend crucially on the proximity between cities. For 'distant' cities with the same size populations, the pressure on tax rates of a more mobile workforce depends on the whether mobile workers are net beneficiaries or net contributors. If mobile workers are either high or low income earners, cities lower tax rates. If mobile workers are middle income earners, cities raise tax rates. For 'close' or neighbouring cities, workers locate in one of the cities and tax rates and local public amenities are dispersed.

Item Type: Article
Uncontrolled Keywords: tax competition; migration; local public goods; coordination equilibria
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 29 Jun 2012 12:43
Last Modified: 17 Aug 2017 18:11

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