Vertical versus horizontal tax externalities : An empirical test ☆

@inproceedings{Brlhart2006VerticalVH,
  title={Vertical versus horizontal tax externalities : An empirical test ☆},
  author={Marius Br{\"u}lhart and Mario Jametti},
  year={2006}
}
We study taxation externalities in federations of benevolent governments. Where different hierarchical government levels tax the same base, one can observe two types of externalities: a horizontal externality, working among governments of the same level and leading to tax rates that are too low compared to the social optimum; and a vertical externality, working between different levels of government and leading to suboptimally high tax rates. Building on the model of Keen and Kotsogiannis [Keen… CONTINUE READING
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