Tax harmonisation and political competition

Lisa Grazzini and Tanguy van Ypersele

No 1997054, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In this paper, we analyse tax harmonisation in the framework of two countries asymmetric in their capital-labour endowment. In the first part, countries play a non-cooperative game and we examine how na- tional fiscal policies are decided according to majority voting. At the Nash equilibrium, inefficiency arises because of the corresponding mis- allocation of resources. In the second part, we analyse fiscal policy co- ordination within the institutional framework of the European Union, where policy reforms are decided by unanimity rule. In most cases, we show that the imposition of a minimum capital tax rate is refused.

Keywords: Fiscal competition; Mobility of factors of production; In- ternational policy coordination; Political economy (search for similar items in EconPapers)
JEL-codes: D72 F20 F42 H87 (search for similar items in EconPapers)
Date: 1997-08-01
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1997054

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