La competencia tributaria vertical y el tamaño del sector público

Abstract

This paper presents a model in which vertical tax externalities emerge when considering taxes on consumption, in countries with a federal government level and states that impose taxes on the same tax base. It is shown that levels of public expenditure and tax rates depend crucially on two factors. First, they depend on the way each government level consider the budget constraint of the other level when varying its tax rates (vertical externality), and secondly, on the quantity of existing subnational governments.