Market-Creating Tax Competition
Econpubblica Working Paper No. 100
46 Pages Posted: 15 Oct 2004
Date Written: October 2004
Tax competition may create new markets, by imposing fiscal restraints, and affect the relative performance of public programs in which the public and private provision coexist (universal or topping up) or are alternative (selective or opting out). Tax competition dwindles the scope of universal programs, while selective programs are relatively immune to it. However, the existence of a minimum operative scale, and the possible mismatch between opting-in and optimal target population may provoke the inefficiency of the latter. A social welfare ranking of universal and selective programs relies on the economic structure, and on government's preference for redistribution.
Keywords: Tax competition, privatization of public services, in-kind transfers
JEL Classification: H7, H4
Suggested Citation: Suggested Citation