When do small countries win tax wars?

Wolfgang Eggert and Andreas Haufler

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: This article analyzes the conditions under which the smaller of two otherwise identical countries prefers the noncooperative Nash equilibrium to a situation of fully harmonized tax rates. A standard two-country model of capital tax competition is extended by allowing for transaction costs, additional countries, and additional tax instruments. The effects of introducing either mobility costs or a wage tax instrument are theoretically ambiguous because they lower both the costs and the benefits of noncooperation from the perspective of the small country. Numerical simulations indicate, however, that for a wide range of parameter values, all model extensions considered reduce the possibility that the small country gains from tax competition.

Date: 1998
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Citations: View citations in EconPapers (9)

Published in Public Finance Review 4 26(1998): pp. 327-361

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Related works:
Journal Article: When Do Small Countries Win Tax Wars? (1998)
Working Paper: When do small countries win tax wars? (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:20544

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