Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98425
Authors: 
Eichner, Thomas
Pethig, Rüdiger
Year of Publication: 
2013
Series/Report no.: 
Volkswirtschaftliche Diskussionsbeiträge, Universität Siegen, Fachbereich Wirtschaftswissenschaften Wirtschaftsinformatik und Wirtschaftsrecht 160-13
Abstract: 
Capital tax competition is known to result in inefficiently low tax rates and an undersupply of public goods. The provision of public goods and with it the welfare of all countries can be enhanced via tax coordination. Based on the standard Zodrow-Mieszkowski-Wilson tax-competition model this paper analyses the conditions under which tax coordination by a group of countries is self-enforcing. It is shown that there always exists a rather small stable tax coalition. For some subset of the parameter space the grand coalition may be stable as well, even if the total number of countries is large. The small stable coalition is not very effec- tive in mitigating the inefficiency of the non-cooperative Nash equilibrium. The ineffectiveness is increasing in the total number of countries.
Subjects: 
tax coordination
tax competition
coalition
self-enforcing
JEL: 
C72
H70
H73
Document Type: 
Working Paper

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