Affordable Access

Even Small Trade Costs Restore Efficiency in Tax Competition



We introduce transport cost of trade in products into the classical Zodrow and Mieszkowski (1986) model of capital tax competition. It turns out that even small levels of transport cost lead to a complete breakdown of the seminal result, the underprovision of public goods. Instead, there is a symmetric equilibrium with efficient public goods provision in all jurisdictions.

There are no comments yet on this publication. Be the first to share your thoughts.