Economics of Governance

, Volume 20, Issue 4, pp 371–388 | Cite as

Production inefficiency, cross-ownership and regional tax-range coordination

  • Mutsumi MatsumotoEmail author
Original Paper


Using a simple asymmetric capital-tax competition model where the allocation of mobile capital is distorted in non-cooperative equilibrium, this paper analyzes the welfare impact of regional tax coordination on a range of possible tax rates (a combination of maximum and minimum capital taxes made by a subset of regions). Under the assumption that the ownership of immobile factors (e.g., business land) is diversified across regions, a new possibility of beneficial coordination arises which has not been identified before: tax-range coordination “among capital-exporting regions” or “among capital-importing regions” may improve the welfare of all regions. This is in contrast to the case without cross-ownership where both capital-exporting and capital-importing regions must be involved in tax-range coordination in order to achieve a Pareto improvement.


Tax competition Regional coordination Cross-ownership 

JEL Classification

F21 H25 H71 H73 R12 R13 



I would like to thank Ryo Itoh, Yukihiro Nishimura, Hikaru, Ogawa, Yasuhiro Sato and Masayoshi Hayashi for very helpful comments. The comments from an anonymous referee were very helpful. This work was supported by JSPS KAKENHI (Grant Number JS18K01668).


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Graduate School of Environmental StudiesNagoya UniversityNagoyaJapan
  2. 2.Professor EmeritusRitsumeikan UniversityKyotoJapan

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