Zur politischen Ökonomie von Defiziten und Kapitalsteuerwettbewerb

Athanassios Pitsoulis and Jens Peter Siebel

No 2009-13, Discourses in Social Market Economy from OrdnungsPolitisches Portal (OPO)

Abstract: We connect the theories of strategic debt and tax competition in a model and explore whether capital mobility coupled with a strategic debt effectively tames Leviathan. Our proposition is that in the case of a small open economy international tax competi-tion for mobile capital opens the way to a previously unexplored sort of strategic deficit. The incumbent conservative government builds a reelection strategy on the downwards pressure on mobile factor tax rates caused by tax competition the liberal successor will be exposed to. As a result it can raise its chances to be reelected by tying the successor's hands on expenditure issues.

Keywords: Structure and Scope of Government; State and Local Budget and Expenditures; Interjurisdictional Differentials and Their Effects (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:opodis:200913

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