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Tax competition and governmental efficiency: Theory and evidence

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Author Info
Maksym Ivanyna
Abstract

This paper studies the impact of a government's efficiency on the taxation policy of a state. Namely, we claim that the countries are different both in the way they tax capital and the way they spend the collected revenue. We build a model of 2 countries competing for foreign investment, government of one of them is more efficient than the other one, which means that it is able to produce more public good out of the same revenue. We show that the country with the more efficient government will charge higher income tax from firms. The theoretical predictions are then tested on a sample of OECD countries, years 1996-2005. In general, empirical results are in line with the theory.

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File URL: http://www.bgpe.de/texte/DP/059_ivanyna.pdf
File Format: application/pdf
File Function: First version, 2008
Download Restriction: no

Publisher Info
Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 059.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 34 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:bav:wpaper:059_ivanyna

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Web page: http://www.bgpe.de/
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Related research
Keywords: international taxation; public ¯nance; asymmetric equilibrium; tax competition;

Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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This page was last updated on 2009-12-4.

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