We characterise a model in which states engage in tax and policy competition with one another to attract mobile capital. The mix of policies chosen is shown to depend on the interaction between a desire to exploit capital for the benefit of domestic residents (labour) and a net marginal...

Section 90 of the Australian Constitution gave the power to impose excise duties exclusively to the commonwealth. Sometimes it is argued that the founders were motivated by a concern to ensure free interstate trade. The authors show that Section 90 may have reduced interstate trade distortions...