This paper considers how capital tax competition affects transfer and development policies in the presence of regional income disparity. In each country, development policies determine the number of rich (poor) regions that (do not) engage in production activities, while transfer policies...

Keen and Marchand ( Journalof Public Economics, 1997, 66, 33–53) argue that undercapital tax competition, the composition of public expenditureis inefficient in that too much is spent on public inputs benefitinglocal business and too little on public goods benefiting residents.Their result...

This paper derives and examines the provision rule for public inputs within a two-class framework of optimal income taxation. If income redistribution policies must be designed under a self-selection constraint because the ability of any particular worker is private information, public input...

Government expenditure on public inputs such as human capital formation and public infrastructure can significantly affect productivity. An interesting and highly relevant policy question is whether such expenditure should be financed according to the benefit-taxation principle. Focusing on...

Contrary to the dominant view of inefficient tax competition, Oates and Schwab (1991) show that capital-tax financing of public inputs leads to efficiency when the supply of these inputs is conditioned on business investment (Oates, W.E., Schwab, R.M., 1991. The allocative and distributive...