The Welfare Effects of Tax Competition Reconsidered: Politicians and Political Institutions

19 Pages Posted: 16 Jun 2009

See all articles by Eckhard Janeba

Eckhard Janeba

University of Mannheim - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Guttorm Schjelderup

Norwegian School of Economics (NHH) - Department of Business and Management Science

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Date Written: 0000

Abstract

The views on the welfare effects of tax competition differ widely. Some see the fiscal externalities as the cause for underprovision of public goods, while others see tax competition as the means of reducing government inefficiencies. Using a comparative politics approach we show that tax competition among presidential-congressional democracies is typically welfare improving, while harmful among parliamentary democracies if under the latter public goods are sufficiently valued. The results hold when politicians seek re-election because of exogenous benefits of holding office. By contrast, when politicians hold office only to extract rents, tax competition is harmful if politicians are sufficiently patient.

Suggested Citation

Janeba, Eckhard and Schjelderup, Guttorm, The Welfare Effects of Tax Competition Reconsidered: Politicians and Political Institutions (0000). The Economic Journal, Vol. 119, Issue 539, pp. 1143-1161, July 2009. Available at SSRN: https://ssrn.com/abstract=1418180 or http://dx.doi.org/10.1111/j.1468-0297.2009.02263.x

Eckhard Janeba (Contact Author)

University of Mannheim - Department of Economics ( email )

L7, 3-5
D-68131 Mannheim
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Guttorm Schjelderup

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

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