Tax competition, excludable public goods, and user charges |
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Authors: | Bernd Huber Marco Runkel |
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Affiliation: | (1) Department of Economics, University of Munich, Ludwigstr. 28, Vgb., III, 80539 Munich, Germany |
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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. |
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Keywords: | Excludable public goods Tax competition |
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