The Direction of Strategic Delegation and Voter Welfare in Asymmetric Tax Competition Models

Yukihiro Nishimura () and Yoshiro Tsutsui ()
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Yukihiro Nishimura: Graduate School of Economics, Osaka University
Yoshiro Tsutsui: Faculty of Economics, Keio University

No 16-27, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper examined a political process and economic consequences of tax competition among asymmetric countries. Citizens are endowed with heterogeneous capital incomes. The median-voters deliberately elect a delegate whose preferences differ from their own, to pursue advantages in the international tax competition. When the countries have different productivity of the capital, the country with a low capital productivity may delegate the tax authority to a citizen who is richer than the median-voter. As a result, the outcome through strategic delegation may make the median-voters and the majority of citizens worse-off than the selfrepresentation outcome, contrary to the previous studies with symmetric countries. Similar results are obtained when the countries differ in capital endowments. In contrast, when the countries differ in population size, productive inefficiency is reduced, and the median-voters are better-off through strategic delegation. We also point out that the role of campaign promises is important for the equilibrium tax rates and citizens f welfare.

Keywords: Capital tax competition; Strategic delegation; Asymmetric countries; Voter welfare (search for similar items in EconPapers)
JEL-codes: C72 D72 D78 H23 H87 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2016-11
New Economics Papers: this item is included in nep-cdm, nep-mic and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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