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A Repeated Interactions Model of Tax Competition
Author(s) -
Cardarelli Roberto,
Taugourdeau Emmanuelle,
Vidal JeanPierre
Publication year - 2002
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/1467-9779.00086
Subject(s) - harmonization , economics , tax competition , competition (biology) , fiscal policy , tax harmonization , international economics , tax policy , macroeconomics , public economics , monetary economics , microeconomics , indirect tax , tax reform , biology , ecology , physics , acoustics
Models of tax competition usually assume a single‐period framework. This paper sets up a repeated interactions model of tax competition and establishes conditions under which fiscal policy harmonization can result from repeated interactions between governments. It is shown that fiscal policy harmonization cannot prevail when regional asymmetries are too strong. In such a case, the only way to achieve fiscal policy harmonization is to set up a central fiscal authority.