Capital Tax Competition and Partial Cooperation: Welfare Enhancing or not?

Holger Kächelein

No 51, BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group

Abstract: The paper analyzes under which conditions a partial tax cooperation will be welfare enhancing within the cooperating regions. Starting from the standard symmetric tax competition model, subgroups of regions can form tax cooperations and thereby increase their relevant market share. As the noncooperation regions react to the tax change in the bloc, the welfare outcome relative to the symmetric case is ambiguous. Complementary to a more general theoretical approach, a simulation is also used to clarify the limits of welfare enhancing partial tax coordination of a subgroup of regions. In the used structure, only if regions are very large, tax rates are complements. However, the case of welfare loss due to a partial tax harmonization is mainly limited to the case of a single cooperation.

Keywords: Capital Tax Competition; Tax Harmonization; Asymmetric Tax Competition (search for similar items in EconPapers)
JEL-codes: F21 H25 H26 (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamber:51

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