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Cover of: Public-Input Provision under Formula Apportionment
Mutsumi Matsumoto

Public-Input Provision under Formula Apportionment

Section: Articles
Volume 72 (2016) / Issue 1, pp. 74-95 (22)
Published 09.07.2018
DOI 10.1628/001522116X14557023949256
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  • 10.1628/001522116X14557023949256
This paper analyzes how the presence of corporate income taxation with formula apportionment affects public-input provision. In a federation endowed with a fixed amount of mobile capital, noncooperative regional governments provide factor-augmenting public inputs and maximize their budget surplus. It is shown that the different systems of formula apportionment have different implications for expenditure inefficiency, although interregional competition for mobile capital always results in undertaxation.