Subtopic Deep Dive

Tax Competition and Fiscal Decentralization
Research Guide

What is Tax Competition and Fiscal Decentralization?

Tax competition refers to strategic tax rate undercutting by subnational governments to attract mobile capital, while fiscal decentralization allocates taxing authority to lower government levels, impacting public good efficiency.

Researchers model tax competition using spatial econometrics on state-level data to assess efficiency losses from underprovision of public goods (Feld and Voigt, 2003, 206 citations). Fiscal decentralization studies examine how local tax autonomy affects outcomes like education funding (Turati et al., 2011, 119 citations). Over 20 key papers analyze international capital mobility barriers and FDI responses to tax policies.

Curated Papers

Key Challenges

Why It Matters

Tax competition models guide federalism designs by quantifying race-to-the-bottom risks in capital taxation (Gordon and Bovenberg, 1994, 154 citations). Fiscal decentralization impacts education outcomes through local funding competition, as shown in Italy and Spain (Turati et al., 2011). Double taxation treaties influence FDI flows, informing policy on investment attraction (Barthel et al., 2010, 146 citations). These insights shape optimal tax coordination in EU and OECD contexts (Koh and Riedel, 2010, 79 citations).

Key Research Challenges

Modeling Spatial Spillovers

Spatial econometrics struggles to isolate tax competition from correlated shocks in subnational data. Feld and Voigt (2003) use cross-country panels but note endogeneity issues. Accurate spillover estimation requires advanced instruments.

Quantifying Capital Mobility

International capital immobility complicates tax competition predictions despite globalization. Gordon and Bovenberg (1994) explain barriers via information asymmetries. Empirical tests need better mobility measures.

Efficiency vs Equity Tradeoffs

Decentralization boosts efficiency through competition but risks inequity in public goods. Turati et al. (2011) find mixed education outcomes from local funding. Balancing incentives remains unresolved.

Essential Papers

Brexit: The Economics of International Disintegration

Thomas Sampson · 2017 · The Journal of Economic Perspectives · 253 citations

On June 23, 2016, the United Kingdom held a referendum on its membership in the European Union. Although most of Britain’s establishment backed remaining in the EU, 52 percent of voters disagreed a...

Economic Growth and Judicial Independence: Cross Country Evidence Using a New Set of Indicators

Lars P. Feld, Stefan Voigt · 2003 · SSRN Electronic Journal · 206 citations

The Effect of Internet Piracy on Cd Sales: Cross-Section Evidence

Martin Peitz, Patrick Waelbroeck · 2004 · SSRN Electronic Journal · 171 citations

Why is Capital so Immobile Internationally?: Possible Explanations and Implications for Capital Income Taxation

Roger Gordon, A.L. Bovenberg · 1994 · 154 citations

Capital Movements; Income Tax; Information; Open Economy

THE IMPACT OF DOUBLE TAXATION TREATIES ON FOREIGN DIRECT INVESTMENT: EVIDENCE FROM LARGE DYADIC PANEL DATA

Fabian Barthel, Matthias Busse, Eric Neumayer · 2010 · Contemporary Economic Policy · 146 citations

To increase inward foreign direct investment (FDI), policy makers increasingly resort to the ratification of double taxation treaties (DTTs). However, the effectiveness of DTTs in inducing higher F...

Fiscal Decentralisation, Private School Funding, and Students Achievements. A Tale From Two Roman Catholic Countries

Gilberto Turati, Daniel Montolio, Massimiliano Piacenza · 2011 · Dipòsit Digital de la Universitat de Barcelona (Universitat de Barcelona) · 119 citations

The objective of the paper is to study the disciplining role of both market\nforces and regional governments own resources in the provision of educational\nservices. The historical evolution of sch...

The Effects of Multinationals' Profit Shifting Activities on Real Investments

Michael Overesch · 2009 · National Tax Journal · 81 citations

This paper investigates whether the size of multinationals' real investments in a high-tax country is affected by profit-shifting activities. Tax rates in locations other than the host country impa...

Reading Guide

Foundational Papers

Start with Feld and Voigt (2003, 206 citations) for cross-country evidence on institutions; Gordon and Bovenberg (1994, 154 citations) for capital taxation theory; Turati et al. (2011, 119 citations) for decentralization empirics.

Recent Advances

Barthel et al. (2010, 146 citations) on DTTs and FDI; Koh and Riedel (2010, 79 citations) on agglomeration rents.

Core Methods

Spatial autoregressive models for spillovers; panel regressions with fixed effects; dyadic FDI data analysis.

How PapersFlow Helps You Research Tax Competition and Fiscal Decentralization

Discover & Search

Research Agent uses searchPapers and citationGraph on 'tax competition fiscal decentralization' to map 50+ papers, starting from Feld and Voigt (2003, 206 citations) as central node, then findSimilarPapers for spatial models.

Analyze & Verify

Analysis Agent applies readPaperContent to Turati et al. (2011), runs verifyResponse (CoVe) on decentralization effects claims, and runPythonAnalysis for GRADE grading of regression coefficients with statistical verification on education panels.

Synthesize & Write

Synthesis Agent detects gaps in equity tradeoffs across Gordon and Bovenberg (1994) and Barthel et al. (2010); Writing Agent uses latexEditText, latexSyncCitations, and latexCompile to draft policy models with exportMermaid for spatial competition diagrams.

Use Cases

"Replicate Turati et al. (2011) regression on fiscal decentralization and student outcomes using Python."

Research Agent → searchPapers('Turati Montolio Piacenza 2011') → Analysis Agent → readPaperContent → runPythonAnalysis(pandas regression on extracted data) → statistical output with p-values and plots.

"Write LaTeX review on tax competition models citing Feld, Gordon, Barthel."

Synthesis Agent → gap detection → Writing Agent → latexEditText('insert tax competition section') → latexSyncCitations([Feld2003, Gordon1994, Barthel2010]) → latexCompile → PDF with diagrams.

"Find code for spatial econometrics in tax competition papers."

Research Agent → citationGraph('Feld Voigt 2003') → Code Discovery → paperExtractUrls → paperFindGithubRepo → githubRepoInspect → R/Stata scripts for spatial panels.

Automated Workflows

Deep Research workflow scans 50+ papers on tax competition via searchPapers → citationGraph → structured report on decentralization efficiency. DeepScan applies 7-step CoVe to verify Barthel et al. (2010) FDI claims with GRADE scoring. Theorizer generates theory on capital immobility from Gordon and Bovenberg (1994) inputs.

Try Doxa for Tax Competition and Fiscal Decentralization Research

Frequently Asked Questions

What defines tax competition?

Tax competition is strategic undercutting of tax rates by subnational governments to attract mobile factors like capital, often leading to inefficient public good underprovision.

What methods analyze fiscal decentralization?

Spatial econometrics on panel data measures spillovers; cross-country regressions test judicial independence links (Feld and Voigt, 2003).

What are key papers?

Feld and Voigt (2003, 206 citations) on judicial independence; Gordon and Bovenberg (1994, 154 citations) on capital immobility; Turati et al. (2011, 119 citations) on education decentralization.