Tax Competition,Capital Flow and Income Inequality
Under the multi-level government structure,the Chinese-style decentralization system not only provides com-patible institutional incentives for local governments but also gives them a certain competitive space through limited de-centralization.Tax competition has become an important policy tool for local governments to strive for mobile production factors and promote high-quality economic development.However,with the rapid growth of China's economy,income in-equality among residents has become increasingly prominent,which has become the biggest constraint on whether China can smoothly overcome the middle-income trap and achieve the strategic goal of common prosperity.In this context,this paper constructs a static general equilibrium model consisting of representative households,representative enterprises,and local governments in two regions,systematically interpreting the mechanism of the effect of local government tax competi-tion on income inequality among residents.The transmission mechanism of"local government tax competition ↑ →capital inequality ↑ →income inequality ↑ →income inequality among residents ↑"is verified using data from 270 prefecture-level cities in China and the instrumental variable method.The marginal contributions and innovations of this paper are twofold.Firstly,we attempt to build a static general equilibrium model including representative households,representative enterprises and local governments and systemati-cally explain the mechanism and impact of tax competition on income inequality among residents based on this theoreti-cal analysis framework.Second,by using Akita&Miyata's(2010)empirical approach,we construct a population-weighted coefficient of variation to scientifically measure the resident income inequality index among 270 prefecture-level cities in China,then empirically investigate the impact of local government tax competition on income inequality among residents by using panel data model and instrumental variable method,and verify the transmission mechanism.In addition,whether the impact of local tax competition on income inequality among residents is biased towards specific tax categories is also validated by further examining the competition among the main tax categories.According to the theoretical model and empirical results of this paper,the impact of local government tax competi-tion on income inequality among residents in different regions is mainly reflected in the following four aspects.Firstly,lo-cal government tax competition has a significant anti-fair distribution effect on income inequality among residents in dif-ferent regions,but its impact on intra-regional income inequality remains insignificant.Secondly,the anti-fair distribution effect is mainly achieved through capital inequality.The differentiated tax rates caused by tax competition encourage capi-tal to flow from underdeveloped areas to developed areas at lower costs,resulting in capital inequality between regions.This capital inequality affects the marginal output of labor in regions,leading to regional labor income inequality and ulti-mately widening income inequality among residents.Thirdly,the research of tax categories shows that the impact of com-petition of corporate income tax and personal income tax is more significant than that of competition of value-added tax and business tax.Fourthly,local government tax competition exhibits significant heterogeneity due to different economic foundations and market environments.The conclusions of this paper not only help to deeply understand the tax competition of local governments and its im-pact and mechanisms on resident income distribution but also provide useful experience and policy reference for how to coordinate high-quality economic development between regions and ultimately achieve common prosperity for all.
万方数据
维普
