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Does tax competition soften regional budget constraint? (English) Zbl 1254.91456

Summary: We analyse the impact of both horizontal and vertical tax competition on central government transfers towards regions, as well as on the softness of the regional budget constraint. We show that tax interactions have no impact on the optimal central government grant whereas they harden the regional budget constraint when the regional debt is not too heavy.

MSC:

91B64 Macroeconomic theory (monetary models, models of taxation)
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