Competition over Standards and Taxes

Valesca Groeneert (), Myrna Wooders and Benjamin Zissimos
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Valesca Groeneert: Department of Economics, Vanderbilt University

No 820, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: We show that, in competition between a developed country and a developing country over standards and taxes, the developing country may have a 'second mover advantage.' A key feature of standards is that, unlike public goods as usually defined, all firms do not unanimously prefer higher standard levels. We introduce this feature to an otherwise familiar model of fiscal competition. Three distinct outcomes can be characterized by varying the cost to firms of 'standard mismatch': (1) the outcome may be efficient; (2) the developing country may be a 'standard haven,' where some firms escape excessively high standards in the developed country; (3) there may be a 'race to the top' with standards set excessively high.

Keywords: Fiscal competition; second mover advantage; standards; tax competition (search for similar items in EconPapers)
JEL-codes: H1 H25 H73 H87 (search for similar items in EconPapers)
Date: 2008-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:0820

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