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Fiscal Interactions Among European Countries. Does the EU Matter?

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  • Michela Redoano

Abstract

We use a panel of European countries to investigate whether or not governments interact with their neighbors when they decide their fiscal policy; we consider both taxes and expenditures, at aggregate and at separate aspects of policy. We analyse possible different competitive behaviours and find evidence of fiscal interdependencies consistently with the literature on tax and yardstick competition. For corporate taxes, the regression results suggest that European countries follow large countries in order to attract capital; for income taxes and public expenditures, instead, fiscal interactions exist but they are mainly due to yardstick competition. Finally, we have found the countries are interdependent with each others before joining the EU, and than, once they are in, they become more independent.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2007/wp-cesifo-2007-03/cesifo1_wp1952.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1952.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_1952

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Related research

Keywords: yardstick competition; tax competition; intergovernmental relations; international fiscal issues; regionalisation;

References

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Citations

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Cited by:
  1. Caldeira, Emilie, 2012. "Yardstick competition in a federation: Theory and evidence from China," China Economic Review, Elsevier, Elsevier, vol. 23(4), pages 878-897.
  2. Lenka Šťastná, 2009. "Spatial Interdependence of Local Public Expenditures: Selected Evidence from the Czech Republic," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 007-025, March.
  3. Michael Overesch & Johannes Rincke, 2009. "What Drives Corporate Tax Rates Down? A Reassessment of Globalization, Tax Competition, and Dynamic Adjustment to Shocks," CESifo Working Paper Series 2535, CESifo Group Munich.
  4. Kempf, Hubert & Rota-Graziosi, Grégoire, 2010. "Endogenizing leadership in tax competition," Journal of Public Economics, Elsevier, Elsevier, vol. 94(9-10), pages 768-776, October.
  5. Heinemann, Friedrich & Overesch, Michael & Rincke, Johannes, 2008. "Rate Cutting Tax Reforms and Corporate Tax Competition in Europe," ZEW Discussion Papers 08-028, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Ronald B. Davies, 2010. "The Silver Lining of Red Tape," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp328, IIIS.
  7. Werck, Kristien & Heyndels, Bruno & Geys, Benny, 2007. "The impact of central places on spatial spending patterns: evidence from Flemish local government cultural expenditures," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-10, Social Science Research Center Berlin (WZB).
  8. Kammas, Pantelis, 2009. "Strategic fiscal interaction among OECD countries," MPRA Paper 15841, University Library of Munich, Germany.
  9. Osterloh, Steffen & Debus, Marc, 2012. "Partisan politics in corporate taxation," European Journal of Political Economy, Elsevier, vol. 28(2), pages 192-207.
  10. Nelly Exbrayat, 2008. "The Impact of Trade Integration and Agglomeration Economies on Tax Interactions : Evidence from OECD Countries," Post-Print hal-00270067, HAL.

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