Inter-jurisdictional fiscal competition

Vol. 25 No. 3 (2005)

Jul-Sep / 2005
Published July 1, 2005
PDF-English
PDF-English

How to Cite

Ferreira, Sergio Guimarães, Ricardo Varsano, and José Roberto Afonso. 2005. “Inter-Jurisdictional Fiscal Competition: A Review of the Literature and Policy Recommendations”. Brazilian Journal of Political Economy 25 (3):295-313. https://centrodeeconomiapolitica.org/repojs/index.php/journal/article/view/644.

Inter-jurisdictional fiscal competition

a review of the literature and policy recommendations

Sergio Guimarães Ferreira
IBMEC/RJ, Av. Rio Branco 108, s/ 906, Rio de Janeiro.
Ricardo Varsano
Fundo Monetário Internacional — FMI, Departamento de Finanças Públicas.
José Roberto Afonso
Assessoria da Câmara dos Deputados, Palácio do Congresso Nacional, Edifício Principal, Praça dos Três Poderes, Brasilia.
Brazilian Journal of Political Economy, Vol. 25 No. 3 (2005), Jul-Sep / 2005, Pages 295-313

Abstract

This paper surveys the literature on fiscal competition. We consider tax and expenditure competition in a more general set up where different jurisdictions within a federation may compete in the provision of public goods in order to attract some residents (Tiebout (1956)) and expel others (Brueckner (1999); and/or for business. We address the vast literature on welfare gains or losses of these types of competition. Then, we discuss the empirical evidence, focusing on estimates of the sensitiveness of production factors to tax differentials and on the importance of the strategic interdependence among jurisdictions. We combine econometric studies with some case studies. Last we discuss the design of mechanisms to cope with fiscal competition, especially under a more global environment where factors become more mobile.

JEL Classification: H77; H73; F2.


Keywords: Fiscal Federalism Tax Differentials Factor Mobility