Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101510
Authors: 
Eggert, Wolfgang
Year of Publication: 
1997
Series/Report no.: 
Diskussionsbeiträge: Serie II, Sonderforschungsbereich 178 "Internationalisierung der Wirtschaft", Universität Konstanz 347
Abstract: 
The paper studies the role of capital mobility for efficiency of decentralized fiscal policies in a tax competition model where only a distorting wage, the residencebased and the source-based capital tax are available. We extend Bucovetsky and Wilson (1991) in deriving second-best taxation rules for small and large countries for each of the four possible combinations of tax instruments both in environments with an unconstrained and with a constrained set of tax instruments available to fiscal authorities. Whereas the model reproduces the result that countries underprovide local public goods in the absence of a residence-based capital tax, Nash equilibria are efficient in the two-tax cases if residence-based capital taxes but no source-based capital or else wage taxes are available. Moreover, aggregate production is situated on the world production frontier when the set of fiscal instruments is unrestricted.
JEL: 
H73
H77
H21
F15
Document Type: 
Working Paper

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