A general equilibrium model of interjurisdictional tax competition

Most of the previous tax competition literature concentrates on analyzing the sources of inefficiency of decentralized decision-making and the character of equilibrium. My concern is the behavior of the taxing locality faced with the competition from other jurisdictions.; In the first essay, I expand the simple two-community model of Boadway (1982) by including non-zero conjectures of decision-makers. I apply the Stackelberg price-leadership model of duopoly in the model.; When I consider non-zero conjectural variations of the decision-makers about the fiscal response of neighboring communities, I find that the levels of public expenditure of one community depends upon the levels of those of other communities and its own conjectural variations. When a community chooses its tax rate as a Stackelberg leader and others act as followers, the levels of public expenditures are Pareto efficient for both communities. When both communities behave as Stackelberg leaders, the outcomes are in general not Pareto efficient. When congestion and "myopic" residents are introduced into the model, I find that the main results do not change.; In the second essay, I include housing as a commodity in the model. I examine the role in local government decision-making of the change of housing price due to changes in public expenditures and property taxation (capitalization). I also examine the relationship between migration decisions of residents and housing price changes due to capitalization. As in the first essay, I examine the decision rules of local governments under different myopia assumptions and conjectural variations.; Using an analysis that parallels the first essay, I find that capitalization plays a crucial role in migration responses of residents and achievement of Pareto efficiency in government decision-making. The changing price of housing guides the direction of migration and leads to efficient allocation of resources in the provision of local public goods. However, I obtain the same conclusion as the first essay regarding the efficient provision of local public goods with different conjectural variations of decision-making governments.