Asymmetric tax competition and fiscal equalization in a repeated game setting

Hikaru Ogawa and Wenming Wang

International Review of Economics & Finance, 2016, vol. 41, issue C, 1-10

Abstract: This paper examines the relationship between tax competition and fiscal equalization in a standard tax competition model with repeated actions, in which regions differ in per capita capital endowments and production technologies. In particular, it asks how a fiscal equalization scheme affects the tax cooperation condition. It shows that when the scale of fiscal equalization scheme increases, capital exporter is more (and capital importer is less) cooperative in implementing tax coordination. The paper also demonstrates that the best cooperative tax rate – the one that provides the strongest potential for voluntary cooperation – takes a positive value and increases with the scale of fiscal equalization.

Keywords: Tax competition; Fiscal equalization; Tax cooperation; Repeated game (search for similar items in EconPapers)
JEL-codes: H21 H77 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:41:y:2016:i:c:p:1-10

DOI: 10.1016/j.iref.2015.10.004

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