論 文 の 要 旨

氏名楊通

論文題目 Study on the Optimal Matching Grant Rates in the Models of Tax

Competition among Jurisdictional Governments
地方政府間の租税競争モデルにおける最適補助率についての研究
論文の要旨
The matching grant program from a central government to the jurisdictional
governments is a strong instrument to solve the problem of an insufficiently provisionof local public goods. The under-provision of public goods arises from different kinds ofexternalities. In this paper, we analyze the relationship between the optimal matching
grant rates and these externalities.
In chapter two, four types of the externalities are assumed, that is, external effect ofconsumption, tax externality, external effect of public inputs and external effect ofproduction. External effect of consumption is that the local public goods that one
jurisdiction provides can raise the jurisdictional inhabitants’ utility and that of otherjurisdictions’ inhabitants. Tax externality is that if a jurisdictional government
finances its local public goods by taxing movable capital among jurisdictions, theinhabitants in the other jurisdictions are also affected by the tax rate in thejurisdiction. External effect of public inputs is that the local public inputs that one
jurisdiction provides can attract the movable factors of production in the otherjurisdictions. External effect of production is that local public inputs that one
jurisdiction provides can raise the jurisdiction’s productivities and that of otherjurisdictions’ productivities.
This chapter assumes that the jurisdictional governments provide the local public
expenditure with the characteristics of both public goods and public inputs. That is,local public goods of which the provision level is a variable in residents’ utility functionand in that for regional production function, and the spillover effects of which caninfluence other regions’ utility of inhabitants and production level. First, we will
analyze the case in which the private capital cannot move among jurisdictions. Then,we will analyze the case in which the private capital can move freely among
jurisdictions. By assuming a good with the characteristics of both public goods andpublic inputs, we obtain some new conclusions that cannot be obtained from theliterature in which the local public goods and the local public inputs are consideredseparately. For example, even if the private capital is assumed to be immovable, theeffect of raising the productivity as a public input may alleviate the under-provision of
public goods owing to external effect of consumption.
Moreover, in this chapter, the productive externalities (the productive spillovereffects) that directly raise the other jurisdictions’ productivities are also considered,
which are not analyzed in the literature. For example, if roads, which are the goods
with the characteristics of both public goods and public inputs, are built in one
jurisdiction, they can also work for the productivity, procuring raw materials and thelogistics in the other jurisdictions. Of course, this effect may be zero in many cases. As
the character of their inputs and their productive spillover effect have not been
considered until now, if we consider those, the matching grant rate for public goods
such as environmental policies should be lower, and the rate for public goods such as
education or canals should be higher.
In chapter three, we introduce agency costs into the model to generalise the effect ofagency problems on the horizontal fiscal externalities and benefit spillovers leading tounder-provision of public goods.
Agency problems arise in any environment involving principal-agent relationships.
Following the theory of agency, if the principal hopes to ensure that the agent will
make decisions that are optimal for the principal rather than the agent themselves,the differing objectives of the pair make agency costs inevitable. This issue not only
applies to firm ownership structure, but also to the political agency process.
Horizontal fiscal externalities originating from tax competition and benefit
spillovers result in under-provision of local public goods (inefficiency). However, theseexternalities also can ease the under-provision of local public goods resulting fromagency costs (inefficiency correction). These two effects simultaneously work in
opposite directions. If agency costs are small and benefit spillover is zero, the former
effect exceeds the latter one, meaning horizontal fiscal externalities aggravate theunder-provision of local public goods. Conversely, when agency costs are small andbenefit spillovers are perfect, or when agency costs are large enough, the latter effectexceeds the former one, which means horizontal fiscal externalities may ease theunder-provision of local public goods. In particular, when agency costs are small andbenefit spillovers are imperfect, the magnitude of the two effects will be ambiguous.
This chapter has focused on the effect of horizontal fiscal externalities on the optimal
matching grant rate in a model where agency costs are inevitable. When benefit
spillover is zero, the relationship between the optimal matching grant rate and private
capital demand elasticities with respect to capital tax depends on agency costs. Thismeans that the inefficiency arising from agency costs may be eased by tax competition
only if the disutility of effort is so large that the benefits resulting from tax competition
exceed its costs when benefit spillover is zero. However, if benefit spillovers occur
among jurisdictions, the results will be ambiguous.

In chapter four, we reconsider the provision of a local public good by a jurisdictional
government in a two-period economy with spillover effects when the jurisdictional
government is assumed to be hyperopic or farsighted. The corrective device used by thecentral government to ensure the optimal level of the local public good is provided by
the jurisdictional government should be adjusted accordingly.
The costs of moving faced by private capital, which are also referred to astransaction costs, should not be ignored in a tax competition model. When the private
capital investor has decided to locate in one jurisdiction and invest in some projects,
these projects will usually last for a long period of time. Once the private capital isinvested, it is usually quite difficult to abandon the projects and leave the jurisdiction
because of the large moving costs. Even if the private capital can move freely among
the jurisdictions in the initial stage, imperfect mobility is inevitable in the later stages.
Therefore, we must consider both transaction costs and inter-temporal effects in a tax
competition model.
By introducing spillover effects into our analysis, we verify that the jurisdiction withthe less efficient production technology may choose to tax private capital in the firstperiod, assuming that a lump-sum tax is available to it, and receive substantial
spillover benefits from the other jurisdiction with more efficient production technology
in the second period when the jurisdiction is hyperopic and benevolent. A clear result isthat the revision of a corrective device used by the central government in the first
period to ensure an optimal level of a local public good is provided by a hyperopic
jurisdictional government, significantly depends on the relative size of the income andspill-in effects in the second period. The relative size of the two effects, which work in
opposite directions, is determined by the tastes and endowments of the jurisdictions,the form of their production functions and the degree of spillovers, among other factors.
When the income effect is larger than the spill-in effect in the second period, theoptimal matching grant rate (the Pigovian tax rate) in the first period from the central
government to a more hyperopic jurisdictional government should be increased(decreased). Conversely, when the spill-in effect is larger than the income effect in thesecond period, the optimal matching grant rate (the Pigovian tax rate) in the firstperiod from the central government to a more hyperopic jurisdictional government
should be decreased (increased).
Notice that the external validity of this result depends on a political strategy of thepoliticians. The benefits that the politicians can obtain in one jurisdiction (there-election rent) equals the marginal increase in the probability of re-election
multiplied by the value of being re-elected. Of course, these factors are seen as theexogenous variables in this model. If the politicians would like to stand for election for
the next term, the conclusion would be valid and could also be a benchmark for someextensions in the future. However, if the politicians would like to stand down, theywould be myopic and their discount factor might be zero in the first period.
In some suburban areas, for example, less populated areas surrounding ametropolitan area but of lower socioeconomic status, beneficial spillovers of local public
goods from the urban core are necessary and essential for the suburban residents. If
the politicians in these kinds of jurisdictions place a significant weight on the distantfuture, the under-provision of local public goods might be eased to some extent.
Accordingly, the central government should decrease the current period’s optimal
matching grant rate to some extent. However, in some urban areas, for example, a
densely populated urban core in a metropolitan area with high socioeconomic status,
benefit spillovers of local public goods from the surrounding territories areunnecessary and negligible for these urban residents. If the politicians in these kindsof jurisdictions place a significant weight on the distant future, the under-provision of
local public goods might be aggravated to some extent. Accordingly, the central
government should increase the current period’s optimal matching grant rate to someextent.