Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Eva Benedicte Danielsen Norman
Agglomeration, tax competition and local public goods supply.
() and Victor Danielsen Norman
Abstract: In this paper we develop a framework for studying tax
competition and local public goods supply in a setting where real and
fiscal externalities interact with local democracy. We use the framework
(a) to analyse if there is any reason to believe that local autonomy
generally will give a tax race to the bottom (there is not), and (b) to
look more closely at possible sources of oversupply or undersupply of
publicly provided goods in a setting where local democracies compete for
people. We identify two potential sources – the relationship between
individual mobility and willingness to pay for publicly provided goods, and
the mobility distribution of individuals (i.e. the distribution of
individuals over residential preferences). The two could reinforce each
other in a local democracy if the majority of the residents in a community
are relatively mobile (the “American” case), while they would pull in
opposite directions if the majority of residents are relatively immobile
(the “European” case).
Keywords: Tax competition; local public goods; agglomeration; migration; regional economic policy; (follow links to similar papers)
JEL-Codes: F12; H21; H73; J61; (follow links to similar papers)
22 pages, August 17, 2010
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