Asymmetric tax competition

Bucovetsky, Sam

doi:10.1016/0094-1190(91)90034-5

Cited by 542 publications

(463 citation statements)

References 6 publications

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“…For example, it has been shown that countries with small populations gain from capital tax competition [Bucovetsky (1991) andWilson (1991)]. This gain will be lost if the competition is alleviated and countries converge through migration.…”

Section: Discussion and Concluding Remarksmentioning

confidence: 99%

Redistribution, Fiscal Competition, and the Politics of Economic Integration

2002

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The paper examines the consequences of the economic integration of factor markets in a model with two countries that redistribute income among their residents. The social benefits in each country are financed by a source based tax on capital which is democratically chosen by its inhabitants. If either capital or labour is internationally mobile, the countries engage in fiscal competition and the partial integration of capital or labour markets is detrimental to the countries' redistributive ability. A move from partial to full integration, however, may alleviate rather than intensify fiscal competition, particularly, if the two countries face sufficiently similar economic and political conditions. In such a situation, for example, tax competition for mobile capital is softened as the labour market becomes more integrated and even vanishes if both factors are fully mobile. As a result, there is more redistribution in equilibrium and a majority of the population * This paper has benefitted from comments by Jan Brueckner, Ig Horstmann, Dave Wildasin, and various participants of seminars at Bonn, Heidelberg, Konstanz, Mannheim, the

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Section: Discussion and Concluding Remarksmentioning

confidence: 99%

Redistribution, Fiscal Competition, and the Politics of Economic Integration

2002

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“…We could complicate the model by assuming that each firm is run by more than one person, but this would unnecessarily complicate the model without further insights. 2 We assume that q is large enough such that the net income of firms and the social welfare are always positive.…”

Section: Firmsmentioning

confidence: 99%

“…Do these disparities between the competing jurisdictions damage global social welfare? Important contributions that address capital tax competition between asymmetric jurisdictions, such as those of Bucovetsky (1991) or Wilson (1991), demonstrate that larger countries choose higher tax rates than smaller countries because they face a relatively lower tax elasticity of capital and, hence, a lower marginal cost of public funds. As a result, equilibrium tax rates differ across states and lead to an inefficient allocation of capital (Wilson and …”

Section: Introductionmentioning

confidence: 99%

Does Size Asymmetry Exacerbate the Inefficiency of Tax Competition?

Han

Pieretti

Zou³

2013

SSRN Journal

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Many authors demonstrate that the tax gap resulting from tax competition increases with the size asymmetry of the competing countries. Consequently, increasing country-size disparities exacerbates the inefficiency of tax competition.The aim of this note is to show that this classical view has no general validity if we consider that countries compete not only in taxes but also in the provision of infrastructure. The simple model we develop for this purpose demonstrates that the effect of size disparity on efficiency depends crucially on the degree of international capital mobility.

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“…The theoretical tax competition literature has identified size differences (expressed as differences in labour endowments) as a factor for explaining why different jurisdictions are affected asymmetrically by tax competition (see Bucovetsky, 1991, andWilson, 1991).…”

Section: Introductionmentioning

confidence: 99%

Tax and the City - A Theory of Local Tax Competition and Evidence for Germany

Janeba

Osterloh

2012

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:http://ftp.zew.de/pub/zew-docs/dp/dp12005.pdf Non-technical summaryIn this paper we use survey responses of mayors from cities and municipalities in the German state of Baden-Württemberg to study the "true" spatial structure of local tax competition. The size of the jurisdiction and, in particular, its economic function turn out to be the important determinants of the decision-maker's perception of the intensity of competition. In particular, respondents from urban centres perceive a much higher intensity of competition for firms with respect to competing jurisdictions which are distant or even located in other countries. Our empirical findings confirm the assumption of the empirical literature about the importance of neighbourhood competition, but it also shows that another important factor is missing. In particular, the assumption of the empirical literature that competition takes place only among neighbours is at odds with the theoretical approaches where all jurisdictions compete simultaneously. The existing standard models, however, are incapable of explaining the empirical particularities of local competition.These empirical findings motivate our sequential tax competition model which considers a rich competition structure. Essentially, we assume a number of metropolitan regions which each consist of one city centre and a number of surrounding (rural) jurisdictions.The model has two levels of competition for mobile capital: first, cities simultaneously compete for mobile capital by setting their tax policies (which can be interpreted as competition for large scale investments, such as headquarters); second, rural areas compete simultaneously for capital within their metropolitan area (which corresponds to the neighbourhood competition).We are especially interested in the effects of a rise in the number of metropolitan regions, which represents the increase in external competition, for example through globalisation, Eastern enlargement of the EU or German unification. It is shown thatsimilarly to standard models -the capital tax rates of the cities converge to zero, but they stay positive for the hinterlands. Moreover, cities are more affected by an increase in external competition than hinterlands, since they reduce capital tax rates more and shift more from mobile capital to immobile labour taxation. In contrast to existing models, our results imply that larger jurisdictions do not necessarily rely mor...

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Asymmetric tax competition

Cited by 542 publications

References 6 publications

Redistribution, Fiscal Competition, and the Politics of Economic Integration

Redistribution, Fiscal Competition, and the Politics of Economic Integration

Does Size Asymmetry Exacerbate the Inefficiency of Tax Competition?

Tax and the City - A Theory of Local Tax Competition and Evidence for Germany

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