Federal tax autonomy and the limits of cooperation

Föderale Steuerautonomie und die Grenzen der Kooperation

Sebastian Kessing, Kai Konrad and Christos Kotsogiannis

Discussion Papers, Research Unit: Market Processes and Governance from WZB Berlin Social Science Center

Abstract: We consider the hold-up problem between a foreign direct investor and the government(s) in a host country with weak governmental structure and lack of power to commit. Using Nash threats, we show that an efficient investment level can be sustained for a sufficiently high discount factor and ask whether a federal structure makes collusion more or less sustainable. We show that collusion between the government and the investor is easier to sustain if the host country is more centralized or if the government layers can commit to fixed sharing rules.

Keywords: Tacit collusion; foreign direct investment; hold-up problem; federalism; vertical tax externality; tax competition (search for similar items in EconPapers)
JEL-codes: H11 H71 H73 H77 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Federal tax autonomy and the limits of cooperation (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbmpg:spii200518

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