Local Taxation, Private-Public Consumption Complementarity, and the Optimal Number of Jurisdictions ()
ABSTRACT
Viewing local finances under the approach
to private-public consumption complementarity, we conclude that foot voting and
tax competition become extinct when the (capital) tax structure across
jurisdictions is the one forging close ties between the burgher and his/her
jurisdiction. The attachment of the burgher to the local public goods offered
and to the local business activity prevents labor and capital mobility. The
optimal number of jurisdictions is that which is conducive to the adoption of
that local taxation that fosters such an attachment; taxation made possible by
capitalizing upon private-public consumption complementarity. The intuitive
appeal of this result is then contemplated within the broader framework of
fiscal policymaking accommodative of citizen heterogeneity. In view of
complementarity, there appears to be scope for decentralized treatment of
citizen preferences via the localities, leaving the treatment of endowment
differences to the central government.
Share and Cite:
Soldatos, G. (2014) Local Taxation, Private-Public Consumption Complementarity, and the Optimal Number of Jurisdictions.
Theoretical Economics Letters,
4, 815-820. doi:
10.4236/tel.2014.49103.
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