Tiebout Equilibria in Local Public Good Economies with Spillovers

Bloch, Francis; Zenginobuz, Ünal

doi:10.2139/ssrn.642001

Cited by 11 publications

(13 citation statements)

References 36 publications

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“…The assumptions of the model deserve some comments. To simplify the model, 9 we assume that the government makes all decisions. The tax administration is simply a 'machine' that follows the government's directives, unlike in Cremer, Marchand and Pestieau (1990) and Sanchez and Sobel (1993), where the tax administration decides the audit strategy.…”

Section: The Modelmentioning

confidence: 99%

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Inspectors or Google Earth? Optimal Fiscal Policies Under Uncertain Detection of Evaders

Besfamille

Olmos

2011

SSRN Journal

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Most of the contributions to the optimal tax-enforcement literature assume that audits are perfect and always discover evaders. However, evasion often remains undetected. To reduce the probability of such a failure, governments invest resources to improve their tax administrations' detection technology. We incorporate these kind of investments into a model that studies optimal fiscal policies under uncertain detection of evaders. We characterize their level and we show numerically how they interact with the other dimensions of an optimal fiscal policy. Finally, we highlight the differences between our results and those obtained in a model without investment in audit technology.

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Section: The Modelmentioning

confidence: 99%

“…Horizontal equity prevents rewarding truthful reports. Therefore, like Mookherjee and Png (1990) and Marhuenda and Ortuño-Ortín (1997), we rule them out of the model 9. Vakneen and Yitzhaki (1989) comment on the necessity of simplifying the models that deal with problems analyzed here 10.…”

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confidence: 95%

Inspectors or Google Earth? Optimal Fiscal Policies Under Uncertain Detection of Evaders

Besfamille

Olmos

2011

SSRN Journal

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“…In the second stage, the government and taxpayers play a "report-audit" game. 7 Each taxpayer i first reports an income level e y i . Then, the government decides whether to audit each individual report or not.…”

Section: The Modelmentioning

confidence: 99%

Optimal Taxes and Penalties When the Government Cannot Commit to Its Audit Policy

et al. 2008

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We examine the problem of a utilitarian government that sets taxes and fines for evaders but cannot commit to any enforcement policy. Given the tax law, the government and taxpayers-some of whom are honest-play a report-audit game that, depending on taxes, fines and audit costs, generates either full evasion and no audits, or partial evasion and random auditing. Anticipating both possibilities, we characterize the optimal tax law. We show that it may be optimal for the government not to fine evaders as a way to commit not to audit. Moreover, social welfare is nonmonotonic in the audit cost.

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“…7 Hoel & Shapiro (2003, 2004 and Hoel (2004) generalize Wellisch's 1994 model to different policy instruments available to the regional governments and different assumptions about the mobility of the population. Bloch & Zenginobuz (2006) examine the consequence of asymmetric spillovers across regions, and Bucovetsky (2011) derives sufficient conditions for decentralized public policy to be Pareto efficient. This model class is very different from ours, because it abstracts from fiscal inefficiencies and does not endogenize the policy outcome as a consequence of household (and voter) mobility, but instead focuses on the strategic interaction among regions using game theoretical tools.…”

Section: Introductionmentioning

confidence: 99%

The welfare costs of Tiebout sorting with true public goods

Kuhlmey

Hintermann

2019

Int Tax Public Finance

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We develop a model of Tiebout sorting based on decentralized income taxation, which allows for spillovers and imperfect rivalry in consumption of the publicly provided good. We identify three sources of welfare loss from decentralization: Imperfect redistribution, inter-jurisdictional free-riding, and inefficient residential choice. Whereas the welfare loss from imperfect redistribution decreases and that from free-riding rises unambiguously as the publicly provided good becomes more pure, the welfare loss from the inefficient residential choice depends non-monotonically on spillovers and rivalry. The equilibrium can be characterized by relative crowding of either the rich or the poor municipality. Our results imply that the characteristics of the publicly provided good are an important determinant for the welfare costs of decentralization.

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Tiebout Equilibria in Local Public Good Economies with Spillovers

Cited by 11 publications

References 36 publications

Inspectors or Google Earth? Optimal Fiscal Policies Under Uncertain Detection of Evaders

Inspectors or Google Earth? Optimal Fiscal Policies Under Uncertain Detection of Evaders

Optimal Taxes and Penalties When the Government Cannot Commit to Its Audit Policy

The welfare costs of Tiebout sorting with true public goods

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