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Who gains from capital market integration: Tax competition between unionized and non-unionized countries

Hikaru Ogawa, Yasuhiro Sato and Toshiki Tamai

No 10-18, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: The welfare effects of capital market integration are examined under a model of tax competition with two asymmetric countries. The asymmetry is expressed through the labor market: one country has a perfect labor market whereas the other country is unionized. Our results show that the welfare effects of capital market integration are different depending on whether governments play an active role in attracting capital: in the absence of active governments, the capital market integration benefits the country with a competitive labor market and harms the unionized country. If the governments are active and compete for mobile capital using tax/subsidy, the market integration benefits both countries. The government fs incentive to participate in a tax/subsidy game is also examined in the integrated capital market. We find that the unionized country always prefers to participate in the tax/subsidy game, but the non-unionized country avoids the game if it is a capital importer.

Keywords: Capital Market Integration; Capital Mobility; Tax Competition; Trade Unions; Welfare. (search for similar items in EconPapers)
JEL-codes: F21 H73 J51 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2010-06
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Who gains from capital market integration? Tax competition between unionized and non-unionized countries (2016) Downloads
Journal Article: Who gains from capital market integration? Tax competition between unionized and non‐unionized countries (2016) Downloads
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