The signaling effect of tax rates under fiscal competition: A (Shannonian) transfer entropy approach

Bogdan Dima, Ştefana Maria Dima and Flavia Barna

Economic Modelling, 2014, vol. 42, issue C, 373-381

Abstract: The present paper argues that if the production factors are mobile, then the countries engaged in fiscal competition are less able to choose fully autonomously a taxation regime, since they have to prevent capital and labor migration. One significant consequence is that changes in neighbor states' fiscal policies may trigger asymmetric information flows between them. We used the (Shannonian) transfer entropy in describing such flows. This measure of information exchanges is useful given that it may be used to detect various types of asymmetry in the interaction among two systems and, thus, distinguishes between driving and responding forces. We examine the European Union's case for a time span between 1995 and 2011 and conclude that Northern Europe, the Germanic countries, the United Kingdom and Ireland are generating the dominant net information outflows.

Keywords: Tax competition; (Shannonian) transfer entropy; European Union (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999314002569
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:42:y:2014:i:c:p:373-381

DOI: 10.1016/j.econmod.2014.07.007

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().