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International Tax and Public Finance

, Volume 9, Issue 2, pp 111–120 | Cite as

Tax Competition and International Public Goods

  • Kjetil Bjorvatn
  • Guttorm Schjelderup
Article

Abstract

A well known result in the tax competition literature is that tax rates are set too low in the Nash equilibrium to finance an efficient level of public consumption goods. In this model we introduce international spillovers in public goods provision and show that such spillovers reduce, and in the limiting case of perfect spillovers, eliminate tax competition. There is, however, always underprovision of the public good in equilibrium, since larger spillovers increase the problem of free riding. In an extension to the model, we demonstrate that congestion costs may result in overprovision of the public good.

tax competition for capital international public goods 

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Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • Kjetil Bjorvatn
    • 1
  • Guttorm Schjelderup
    • 2
  1. 1.Norwegian School of Economics and Business Administration and LOSNorway
  2. 2.Norwegian School of Economics and Business Administration and CESifoNorway

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