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Federal tax autonomy and the limits of cooperation

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  • Kessing, Sebastian G.
  • Konrad, Kai A.
  • Kotsogiannis, Christos

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. -- Wir betrachten das „Hold-up Problem“, das in den Beziehungen zwischen einem ausländischen Investor und der Regierung, bzw. den Regierungen eines Gastlandes mit schwachen institutionellen Strukturen besteht. Unter Verwendung von Nash-Drohungen wird gezeigt, dass eine Überwindung des Holdup Problems durch wiederholte Interaktion zwischen den Akteuren möglich ist. Weiterhin wird untersucht, ob föderale Strukturen eine solche Überwindung wahrscheinlicher machen oder nicht. Schließlich wird gezeigt, dass eine Überwindung des Hold-up Problems besser gelingt, wenn die verschiedenen Regierungsebenen des Gastlandes sich bindend auf eine gemeinschaftssteuerliche Aufteilung des Steueraufkommens festlegen können.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 59 (2006)
Issue (Month): 2 (March)
Pages: 317-329

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Handle: RePEc:eee:juecon:v:59:y:2006:i:2:p:317-329

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Web page: http://www.elsevier.com/locate/inca/622905

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References

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Citations

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Cited by:
  1. Áron Kiss, 2012. "Minimum taxes and repeated tax competition," International Tax and Public Finance, Springer, Springer, vol. 19(5), pages 641-649, October.
  2. Michael Keen & Kai A. Konrad, 2012. "International Tax Competition and Coordination," Working Papers, Max Planck Institute for Tax Law and Public Finance international_tax_competi, Max Planck Institute for Tax Law and Public Finance.
  3. repec:pdn:wpaper:48 is not listed on IDEAS
  4. Geys, Benny & Konrad, Kai A., 2010. "Federalism and optimal allocation across levels of governance," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism", Social Science Research Center Berlin (WZB) SP II 2010-09, Social Science Research Center Berlin (WZB).
  5. Sonja Brangewitz & Sarah Brockhoff, 2012. "Stability of Coalitional Equilibria within Repeated Tax Competition," Working Papers CIE, University of Paderborn, CIE Center for International Economics 48, University of Paderborn, CIE Center for International Economics.
  6. Sonja Brangewitz & Sarah Brockhoff, 2012. "Stability of Coalitional Equilibria within Repeated Tax Competition," Working Papers, Bielefeld University, Center for Mathematical Economics 461, Bielefeld University, Center for Mathematical Economics.

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