This paper points to the important role which the elasticity of aggregate capital supply with respect to the net rate of return to capital plays for the efficiency of policymaking in a decentralized economy with mobile capital and spillovers among jurisdictions. In accordance with previous...

This paper investigates how the abolishment of a ban on tuition fees affects the quality of higher education with centralized and decentralized decision making. It is shown that a marginal introduction of tuition fees fully crowds out public funds under centralization, whereas educational...

This paper addresses the problem of partial tax coordination among regional or national sovereign governments in a repeated game setting. We show that partial tax coordination is more likely to prevail if the number of regions in a coalition subgroup is smaller and the number of existing regions...

This paper contributes to resolving the puzzle that in practice most countries use ad valorem (corporate income) taxation, while a large part of the tax competition literature views business taxes as unit (wealth) taxation. We point to the dual role corporate taxation plays in attracting mobile...

We test the hypothesis that the flypaper effect can arise if the recipient government finances part of its expenditures with a distortionary tax. We present a simple theoretical framework that shows how a lump-sum transfer stimulates the marginal expenditures of a recipient government through an...

The tax competition for mobile capital, in particular the reluctance of small countries to agree on measures of tax coordination, has ongoing political and economic fallouts within Europe. We analyse the effects of introducing a two tier structure of capital taxation, where the asymmetric member...

This paper explores the role of information transmission and misaligned interests across levels of government in explaining variation in the degree of decentralization across countries. Within a two-sided incomplete information principal-agent framework, it analyzes two alternative...