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John Douglas Wilson - One of the best experts on this subject based on the ideXlab platform.
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Decentralization and International Tax Competition
Journal of Public Economics, 2005Co-Authors: John Douglas Wilson, Eckhard JanebaAbstract:This paper models Tax Competition between two countries that are divided into regions. In the first stage of the game, the strategy variable for each country is the division of the provision of a continuum of public goods between the central and regional governments. In the second stage, the central and regional governments choose their Tax rates on capital. A country’s decentralization level serves as a strategic tool through its influence on the mix of horizontal and vertical externalities that exist under Tax Competition. In contrast to standard Tax Competition models, decentralizing the provision of public goods may be welfare-enhancing.
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capital Tax Competition bane or boon
Journal of Public Economics, 2004Co-Authors: John Douglas Wilson, David E WildasinAbstract:This paper reviews potential advantages and disadvantages of capital Tax Competition. Tax Competition may introduce, mitigate, or exacerbate inefficiencies in both the private sector and the public sector. In different models, Tax Competition may either limit or increase public expenditures and Taxes on mobile factors, with differing welfare consequences. We also discuss the implications of Tax Competition for redistributive policies and for policies dealing with risk, and we identify some of the possible empirical implications of Tax Competition. D 2003 Elsevier B.V. All rights reserved.
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Tax Competition and Trade Protection
National Bureau of Economic Research, 1999Co-Authors: Eckhard Janeba, John Douglas WilsonAbstract:This paper reconsiders the question of whether Tax Competition for mobile capital leads to Tax rates on capital that are too low or too high from the combined viewpoint of the competing regions (or countries in an economic union). In contrast to standard models of Tax Competition, both commodity trade and capital mobility is allowed to occur between the competing regions and the rest of the world. A key result of the analysis is that whether the capital Taxes are too low or high depends on the degree of external trade protection. When the country's central government is free to set the tariff, Tax Competition leads to inefficiently low Tax rates. But in the absence of a tariff, Tax rates can be too high. In particular, regions may choose to subsidize capital in equilibrium as a means of inducing favorable terms-of-trade effects, but the subsidy (i.e., a negative Tax) will then be too low because an increase in a single region's subsidy benefits other regions by reducing their relative quantities of subsidized capital. These results are discussed in the context of the European Union's Single Market, where non-EU firms have responded to the 'Fortress of Europe' by increasing foreign direct investment.
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Tax Competition and Trade Protection
1999Co-Authors: Eckhard Janeba, John Douglas WilsonAbstract:This paper reconsiders the question of whether Tax Competition for mobile capital leads to Tax rates on capital that are too low or too high from the combined viewpoint of the competing regions (or countries in an economic union). In contrast to standard models of Tax Competition, both commodity trade and capital mobility is allowed to occur between the competing regions and the rest of the world. A key result of the analysis is that whether the capital Taxes are too low or high depends on the degree of external trade protection.
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theories of Tax Competition
National Tax Journal, 1999Co-Authors: John Douglas WilsonAbstract:A central message of the Tax Competition literature is that independent governments engage in wasteful Competition for scarce capital through reductions in Tax rates and public expenditure levels. This paper discusses many of the contributions to this literature, ranging from early demonstrations of wasteful Tax Competition to more recent contributions that identify efficiency-enhancing roles for Competition among governments. Such roles involve considerations not present in earlier models, including imperfectly-competitive market structures, government commitment problems, and political economy considerations.
Rudiger Pethig - One of the best experts on this subject based on the ideXlab platform.
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Kant–Nash Tax Competition
International Tax and Public Finance, 2020Co-Authors: Thomas Eichner, Rudiger PethigAbstract:In a two-country economy, we analyze how Tax Competition differs from the standard all-Nashian Tax Competition, if one or both countries are Kantians in Roemer’s sense. Kantians are shown to choose a higher Tax rate than Nashians for any given Tax rate of the other country, which indicates that they seek to mitigate the (Nashian) race to the bottom. In case of symmetric countries, the all-Kantian Tax Competition turns out to be efficient and the inefficient race to the bottom is weakened in economies with a Nashian and a Kantian. That confirms the intuitive idea that countries following the Kantian categorical imperative avoid or at least soften the socially undesirable impact of (Nashian) self-interest. We also investigate the incentives of opportunistic countries to choose Nashian or Kantian behavior out of self-interest and find that either both governments choose to behave as Kantians or that—under different conditions—the robust Nashian self-interest supersedes Kantian moral principles such that the inefficient all-Nashian Tax Competition results.
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Kant-Nash Tax Competition
International Tax and Public Finance, 2020Co-Authors: Thomas Eichner, Rudiger PethigAbstract:In a two-country economy we analyze how Tax Competition differs from the standard all-Nashian Tax Competition, if one or both countries are Kantians in Roemer’s sense. Kantians are shown to choose a higher Tax rate than Nashians for any given Tax rate of the other country, which indicates that they seek to mitigate the (Nashian) race to the bottom. We avoid dealing with multiple equilibria by assuming that capital is sufficiently scarce, and we find for symmetric countries that the all-Kantian Tax Competition is efficient and that the inefficient race to the bottom is weakened in economies with a Nashian and a Kantian. That confirms the intuitive idea that countries following the Kantian categorical imperative avoid or at least soften the socially undesirable impact of (Nashian) self-interest. We also investigate the incentives of opportunistic countries to choose Nashian or Kantian behavior out of self-interest and find that either both governments choose to behave as Kantians or that - under different conditions - the robust Nashian selfinterest supersedes Kantian moral principles such that the inefficient all-Nashian Tax Competition results.
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Profit Tax Competition and formula apportionment
International Tax and Public Finance, 2007Co-Authors: Rudiger Pethig, Andreas WagenerAbstract:We analyze corporate income Tax Competition with international capital mobility when the common Tax base is allocated to governments according to an apportionment formula. Labor can be either internationally mobile or immobile. We compare the Nash equilibria for different apportionment methods. Tax Competition produces lower Tax rates the more elastically the formula share responds to Tax rate changes. More specifically, equilibrium Tax rates are typically lowest when apportionment is based on property-shares, followed by payroll- and sales-shares apportionment. Compared to their cooperative levels, equilibrium Tax rates are too low for property-share apportionment but tend to be too high for the other formulas.
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profit Tax Competition and formula apportionment
International Tax and Public Finance, 2007Co-Authors: Rudiger Pethig, Andreas WagenerAbstract:We analyse Tax Competition with corporate income Taxes in a common market where Tax revenues are allocated according to an apportionment formula. Generally, Tax Competition is sharper (i.e., equilibrium Tax rates are lower) the more Tax-elastic is the apportionment formula. This depends on the properties of production technologies. In particular: (i) With fixed labour input, Tax Competition is sharpest if apportionment is based on property-shares, followed by the sales- and payroll-shares. (ii) If capital and labour are endogenous and technologies are Cobb-Douglas, Tax Competition under the property- and the payroll-share rule is sharper than under the sales-share formula. Factor elasticities determine whether payroll- or property-share apportionment generates sharper Tax Competition.
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profit Tax Competition and formula apportionment
Volkswirtschaftliche Diskussionsbeiträge, 2003Co-Authors: Rudiger Pethig, Andreas WagenerAbstract:We analyse Tax Competition with corporate profit Taxes in a common market where Tax revenues are allocated according to an apportionment formula. As a general rule, Tax Competition is sharper the higher is the Tax elasticity of the apportionment formula which, in turn, depends on the properties of production technologies. In particular: (i) If labour input is fixed, Tax Competition is sharpest if apportionment is based on property shares, followed by the sales and payroll shares. (ii) If capital and labour are endogenous and technologies are Cobb-Douglas, Tax Competition under the property- and the payroll-share rule is sharper than under the output-share formula. Whether payroll- or property-share apportionment generates sharper Tax Competition, depends on factor elasticities.
Thomas Eichner - One of the best experts on this subject based on the ideXlab platform.
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Kant–Nash Tax Competition
International Tax and Public Finance, 2020Co-Authors: Thomas Eichner, Rudiger PethigAbstract:In a two-country economy, we analyze how Tax Competition differs from the standard all-Nashian Tax Competition, if one or both countries are Kantians in Roemer’s sense. Kantians are shown to choose a higher Tax rate than Nashians for any given Tax rate of the other country, which indicates that they seek to mitigate the (Nashian) race to the bottom. In case of symmetric countries, the all-Kantian Tax Competition turns out to be efficient and the inefficient race to the bottom is weakened in economies with a Nashian and a Kantian. That confirms the intuitive idea that countries following the Kantian categorical imperative avoid or at least soften the socially undesirable impact of (Nashian) self-interest. We also investigate the incentives of opportunistic countries to choose Nashian or Kantian behavior out of self-interest and find that either both governments choose to behave as Kantians or that—under different conditions—the robust Nashian self-interest supersedes Kantian moral principles such that the inefficient all-Nashian Tax Competition results.
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Kant-Nash Tax Competition
International Tax and Public Finance, 2020Co-Authors: Thomas Eichner, Rudiger PethigAbstract:In a two-country economy we analyze how Tax Competition differs from the standard all-Nashian Tax Competition, if one or both countries are Kantians in Roemer’s sense. Kantians are shown to choose a higher Tax rate than Nashians for any given Tax rate of the other country, which indicates that they seek to mitigate the (Nashian) race to the bottom. We avoid dealing with multiple equilibria by assuming that capital is sufficiently scarce, and we find for symmetric countries that the all-Kantian Tax Competition is efficient and that the inefficient race to the bottom is weakened in economies with a Nashian and a Kantian. That confirms the intuitive idea that countries following the Kantian categorical imperative avoid or at least soften the socially undesirable impact of (Nashian) self-interest. We also investigate the incentives of opportunistic countries to choose Nashian or Kantian behavior out of self-interest and find that either both governments choose to behave as Kantians or that - under different conditions - the robust Nashian selfinterest supersedes Kantian moral principles such that the inefficient all-Nashian Tax Competition results.
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Labor Markets and Capital Tax Competition
International Tax and Public Finance, 2011Co-Authors: Thomas Eichner, Thorsten UpmannAbstract:Ogawa et al. (2006) analyze capital Tax Competition in a fixed-wage approach and show that the original results of Zodrow and Mieszkowski (1986) are not preserved in the presence of unemployment. In the present paper we challenge this view and investigate capital Tax Competition for some arbitrary institutional setting of the labor market. We find that if the labor market is characterized by some efficient bargaining solution, the results of Zodrow and Mieszkowski (1986) are preserved.
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Tax-Competition with Involuntary Unemployment
2010Co-Authors: Thomas Eichner, Thorsten UpmannAbstract:In the present paper we extend the classical Tax-Competition framework of Zodrow and Mieszkowski (1986) by modelling involuntary unemployment and by allowing for labour Taxation as a second source of public funds. For a large class of production functions (including CES), it turns out that Tax Competition is characterized by underprovision of public goods, and by positive Taxes on both labour and capital. We thus conclude that the results of Zodrow and Mieszkowski survive some important and substantial modifications of the framework, and are thus more general than recently suggested elsewhere.
Signe Krogstrup - One of the best experts on this subject based on the ideXlab platform.
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Standard Tax Competition and Increasing Returns
Journal of Public Economic Theory, 2008Co-Authors: Signe KrogstrupAbstract:The “race to the bottom” result of the standard Tax Competition literature implies that capital Taxes are competed downward as capital becomes more mobile. The new economic geography literature, in contrast, finds that increasing capital mobility can be associated with a rise in capital Tax rates, or a “race to the top.” This paper derives the race to the top result from within the standard Tax Competition modeling framework augmented with agglomeration forces. When agglomeration forces are sufficiently strong, Tax Competition pressures are mitigated and capital Taxes are instead driven by Tax exporting incentives.
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INCREASING RETURNS IN A STANDARD Tax Competition MODEL
2004Co-Authors: Signe KrogstrupAbstract:The standard Tax Competition literature predicts a race to the bottom in capital Tax rates as capital mobility increases. Recently, the very different modeling framework of the new economic geography literature has produced the contrasting result that economic integration leads to agglomeration rents to capital which can be Taxed away, in turn leading to higher corporate Taxation. This paper incorporates increasing returns directly into the standard Tax Competition modeling framework to identify the origin of this disparity of results. The model illustrates that increasing returns reduce traditional Tax Competition pressures as capital mobility increases, and that changes in preferences for the public good, combined with increasing cross-border ownership of capital, and thus Taxexporting incentives, are the main factors driving Tax rates higher. Tax exporting has not previously been linked endogenously to capital mobility in standard Tax Competition models or new economic geography models.
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What do Theories of Tax Competition Predict for Capital Taxes in EU Countries? A Review of the Tax Competition Literature
2002Co-Authors: Signe KrogstrupAbstract:The paper reviews the theoretical literature on capital Tax Competition relevant for capital Taxation in the European Union. The basic Tax Competition model a la Zodrow and Mierzkowski (1986) is presented, and the arguments of the literature are subsequently integrated into the framework of the basic Tax Competition model. The review includes models of Tax Competition where countries are assumed large, asymmetric, when there are more than one Tax instrument, where there are more than one Tax base, when government is assumed self-serving, and where democratic elections and political equilibrium are allowed for. Moreover, the consequences of agglomeration economies for Tax Competition pressures are reviewed and incorporated into the standard Tax Competition model.
Yvon Rocaboy - One of the best experts on this subject based on the ideXlab platform.
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regional Tax Competition evidence from french regions
Regional Studies, 2009Co-Authors: Emmanuelle Reulier, Yvon RocaboyAbstract:Reulier E. and Rocaboy Y., Regional Tax Competition: evidence from French regions, Regional Studies. Two mechanisms can lead to fiscal strategic interactions between local jurisdictions. The first is due to the Tax base mobility. Authorities use fiscal variables to attract new resources. The second is related to information asymmetries between the politicians and the constituency. To reduce these asymmetries, voters can compare their fiscal situation with the one in neighbouring jurisdictions. These two channels lead to what can be referred to as ‘mobility-led’ and ‘information-led’ Tax Competition. This paper aims to discriminate between these two Tax Competition models in the case of the French regions. The econometric tests suggest that when Taxes are paid by voters, the politicians in office seem to be involved in an ‘information-led’ Tax Competition, while in the case of Taxes paid by firms, the mobility of the Tax base seems to be the best way to explain strategic fiscal interactions. Reulier E. et ...
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regional Tax Competition evidence from french regions
Post-Print, 2009Co-Authors: Emmanuelle Reulier, Yvon RocaboyAbstract:Two mechanisms can lead to fiscal strategic interactions between local jurisdictions. The first is due to the Tax base mobility. Authorities use fiscal variables to attract new resources. The second is related to information asymmetries between the politicians and the constituency. To reduce these asymmetries, voters can compare their fiscal situation with the one in neighbouring jurisdictions. These two channels lead to what can be referred to as 'mobility-led' and 'information-led' Tax Competition. This paper aims to discriminate between these two Tax Competition models in the case of the French regions. The econometric tests suggest that when Taxes are paid by voters, the politicians in office seem to be involved in an 'information-led' Tax Competition, while in the case of Taxes paid by firms, the mobility of the Tax base seems to be the best way to explain strategic fiscal interactions.
