Relaxing tax competition through public good differentiation
Zissimos, Ben and Wooders, Myrna Holtz (2005) Relaxing tax competition through public good differentiation. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.737).
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This paper argues that, because governments are able to relax tax competition through public good differentiation, traditionally high-tax countries have continued to set taxes at a relatively high rate even as markets have become more integrated. The key assumption is that firms vary in the extent to which public good provision reduces costs. We show that Leviathan governments are able to use this fact to relax the forces of tax competition, reducing efficiency. When firms can ‘vote with their feet’ tax competition leads firms to locate in ‘too many’ jurisdictions. A ‘minimum tax’ further relaxes tax competition, further reducing efficiency.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Noncooperative games (Mathematics), Taxation -- Econometric models, Equilibrium (Economics), Information asymmetry, Dependency|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Official Date:||October 2005|
|Number of Pages:||45|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
 Alesina, A. and E. Spolaore (1997); “On the Number and Size of Countries.” Quarterly Journal of Economics, 112(4): 1027-1056.
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