PARTIAL TAX HARMONIZATION THROUGH INFRASTRUCTURE COORDINATION

Patricia Sanz‐Córdoba and Bernd Theilen ()

Economic Inquiry, 2018, vol. 56, issue 2, 1399-1416

Abstract: In this article, we analyze the role of infrastructure coordination in facilitating partial tax harmonization within a coalition of asymmetric jurisdictions. Two main results are obtained. First, productivity asymmetries represent a serious handicap for partial tax harmonization that can be remedied by coordinating nontax instruments when they allow to reduce these asymmetries. Second, infrastructure coordination through the choice of a common investment level is particularly indicated when asymmetries between potential members of a tax coalition are large. The current usage of European Union (EU) structural funds orientated to reduce regional infrastructure deficits is therefore suitable to facilitate tax harmonization within the EU. (JEL H87, H54, H21)

Date: 2018
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