| This dissertation studies tax competition between regions which possess different endowments of production factors. We investigate optimal policies of the heterogeneous regions, welfare of their residents, efficiency properties of equilibrium, and provide some policy suggestions in the asymmetric tax competition.;To begin with, we consider non-cooperative tax competition between heterogeneous regions with different per-capital endowments of capital. It is shown that the optimal policies, the welfare of the residents, and the regions incentive to cooperative are strongly related to relative factor endowments between regions.;The second issue is a policy suggestion to enhance efficiency. By incorporating a central government into the model, we show how corrective subsidies from the central government can induce an equilibrium in which both production and consumption efficiencies are achieved.;Finally, the problem of the choice between policy instruments is introduced. Heterogeneous regions will be allowed to choose their own policy instruments. We consider both tax and public expenditure as the policy instruments available to the region. Both regions are shown to choose the same policy instruments in the equilibrium. |
