Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/142543 
Year of Publication: 
2009
Series/Report no.: 
EERI Research Paper Series No. 11/2009
Publisher: 
Economics and Econometrics Research Institute (EERI), Brussels
Abstract: 
This paper investigates whether OECD countries compete with each other for mobile factors by using various fiscal (tax-spending) policy instruments. We use a panel dataset of 20 OECD countries over the 1982-2000 period. There is evidence that international capital inflows (FDI) are affected by fiscal policy at home and abroad. Also, there is evidence of fiscal competition for mobile factors which takes place via capital tax rates. More precisely, we find that domestic capital tax rates react: (i) positively to changes in capital tax rates and (ii) negatively to changes in public investment spending in neighbouring countries. In contrast, evidence of such a strategic interdependence over public investment spending decisions is not established.
Subjects: 
Capital mobility
tax competition
welfare
JEL: 
F02
H2
H4
Document Type: 
Working Paper

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