International Tax and Public Finance

, Volume 16, Issue 3, pp 321–336 | Cite as

Tax competition, excludable public goods, and user charges

Article
First Online:

Abstract

This paper provides an explanation for the increasing reliance on revenue from user charges on excludable public goods. We develop a model with many identical countries. The government of each country imposes a source-based tax on capital and supplies an excludable public good to heterogeneous households. Without tax competition, the price on the public good is zero. Tax competition induces each country to choose a positive price. The reliance on user charges turns out to be increasing in the intensity of tax competition measured by the number of countries. A coordinated decrease in user charges is shown to raise welfare in all countries.

Keywords

Excludable public goods Tax competition 

JEL

H41 H73 H77 
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Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of MunichMunichGermany

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