Equilibrium Leadership in Tax Competition Models with Capital Ownership: A Rejoinder
Jean Hindriks () and
Y. Nishimura ()
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Y. Nishimura: Osaka University
No 2015021, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)
This paper reconciles two opposite results in the tax competition literature. On one side Kempf and Rota-Graziosi (J.Pub. Econ 94:768-776, 2010) and Hindriks and Nishimura (J. Pub Econ 121:66-68, 2015) have shown that the two Stackelberg outcomes prevail as the subgame perfect equilibria when capital is entirely owned by non-residents. On the other side Ogawa (Int. Tax Pub Fin 20:474-484, 2013) has shown that the simultaneous- move outcome prevails when capital is entirely owned by residents. We develop a model in which capital ownership can vary freely between these two polar cases. We show that there exists a unique degree of residential capital ownership such that the equilibrium switches from the Stackelberg to the simultaneous-move outcomes. The chance for the simultaneous-move outcome to prevail increases with the extent of asymmetry among regions.
Keywords: Endogenous timing; Tax competition; Capital ownership (search for similar items in EconPapers)
JEL-codes: H30 H87 C72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth
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Journal Article: Equilibrium leadership in tax competition models with capital ownership: a rejoinder (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2015021
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