Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314655 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11616
Publisher: 
CESifo GmbH, Munich
Abstract: 
The conventional wisdom is that a big jurisdiction sets a higher tax rate than a small jurisdiction. We show this result arises due to simplifying assumptions that imply tax-base sensitivities are equal across jurisdictions. When more than two jurisdictions compete in commodity taxes, tax-base sensitivities need not be equal across jurisdictions and a small jurisdiction can set a higher tax rate than a big jurisdiction. Our analysis extends to capital and profit taxes, and, more generally, to various types of multi-player asymmetric competition.
Subjects: 
Ramsey rule
inverse elasticity
fiscal competition
optimal taxation
spatial price competition
sales tax
JEL: 
C70
D40
H20
H70
L10
R50
Document Type: 
Working Paper
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