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Tax Competition, Capital Mobility, and Public Good Provision Within a Trading Block
Author(s) -
Hatzipanayotou Panos,
Hadjiyiannis Costas,
Michael Michael S.
Publication year - 2002
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.t01-1-00342
Subject(s) - economics , nash equilibrium , tax competition , microeconomics , consumption (sociology) , general equilibrium theory , monetary economics , capital (architecture) , international economics , public economics , international taxation , tax reform , social science , archaeology , sociology , history
The authors examine a two–country general–equilibrium model of a two–country trading block where governments through tax policies attract mobile capital and provide an imported public consumption good. Within this framework the authors examine, among other things, how preferences over the public good and the size (population) of a country affect the Nash or cooperative equilibrium values of income tax rates in the two countries. The analysis identifies sufficient conditions under which (i) the Nash/cooperative equilibrium income tax rates are strategic substitutes or complements, and (ii) the Nash equilibrium income tax rates may be greater than the cooperative rates.