TY  - JOUR
AU  - Sinn,Hans-Werner
TI  - The Principle and Market Failure in Systems Competition
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5411
PY  - 1999
Y2  - March 1999
UR  - http://www.nber.org/papers/w5411
L1  - http://www.nber.org/papers/w5411.pdf
N1  - Author contact info:
Hans-Werner Sinn
Ifo Institute -
Leibniz Institute for Economic Research
at University of Munich
Poschingerstr. 5
81679 Munich
GERMANY
Tel: 49-89-21802748
Fax: 49-89-397303;49-89-8506434 (home)
E-Mail: sinn@ifo.de
AB  - Contrary to a frequent contention, systems competition cannot work when governments respect the Subsidiarity Principle.  The principle implies that governments step in where markets fail. Reintroducing markets through the back door of systems competition will again result in market failure.  Three models are presented which illustrate this wisdom.  The first is concerned with congestion-prone public goods and shows that fiscal competition may be ruinous for the governments.  The second considers the insurance function of redistributive taxation and shows that systems competition may suffer from adverse selection.  The third studies the role of quality regulation and shows that systems competition may be a competition of laxity resulting in inefficiently low quality standards.
ER  -