Imperfectly mobile households and durable local public goods: does the capitalization mechanism work?

Article Abstract:

The decision making of any local government is complicated by the concern that its residents will migrate before they can fully experience the benefits of the current tax and spending policies. It has been proposed that local governments can be motivated to improve their efficiency by capitalizing such benefits into current property values. An analysis of the role of imperfect information in residential mobility is conducted. Imperfect mobility is modeled by combining existing frameworks for 'stayers,' or those who live in a jurisdiction for only one period of time, and for 'movers,' those who live for two periods. The model reflects the interdependence of imperfect information and imperfect mobility, and demonstrates they aggravate each other. The results of the analysis are discussed.

Analysis, Economic policy, Economics, Local government, Information theory, Residential mobility, Information theory in economics

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Mobile labor, multiple tax instruments, and tax competition

Article Abstract:

The body of research on tax competition supports the notion that local governments limit property tax rates at inefficiently low levels to curb capital outflows, resulting in a shortage of local public goods. To extend the literature on this subject, mobile labor and an alternative tax instrument are also incorporated into the model. Under this framework, jurisdictions have access to a property tax imposed on land and capital, aside from either a head tax or a labor tax. Scale economies in the provision of public good motivate the application of the property tax although these motivators do not come with higher incentives to underprovide public goods. On the other hand, underprovision is related to the use of a distortionary labor tax.

Research, Local taxation, Property taxes, Property tax, Labor mobility

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Welfare-improving competition for mobile capital

Article Abstract:

A system is developed to prove that greater public input by governments draws mobile capital to areas, which increases revenue gains from both wage and capital taxation. Thus, competition to attract mobile capital improves efficiency of government activity and promotes the welfare of residents.

Management dynamics, Management, Company business management, Capital movements, Capital expenditures, Capital levy, Capital taxes

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