Switching costs can prevent products that would be socially beneficial from being produced. We construct a model in which the switching cost takes the form of an investment required to manufacture a new form of an existing product. Given the cost, it is privately rational for producers not to...

The governance of tax policy is one of the key issues that must be resolved by the new Constitution. Taxation is an area in which the tension between subsidiarity and coordination is acute. This paper reviews recent Union policy alongside an analysis of the underlying economic issues. The...

In this paper we derive the equilibrium level of redistribution from one mobile factor (say, the rich or capital) to another posibly mobile factor (say, the poor or labour) when regions choose both their inter-regional transfers and redistributive policies non-cooperatively. We find that...

Problems of intergovernmental policy coordination can take many forms and are becoming increasingly important with continuing economic integration. In this paper we focus on the fiscal competition problem where the non-cooperative choice of taxes and transfers among governments typically leads...

The marginal cost of public funds (MCF) measures the cost to the economy of raising government revenue. The MCF can be used to guide reform of the tax system and to determine an efficient level of government expenditure. It can also be used as an input into cost-benefit analysis. Previous...