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The right-wing power of small countries

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  • Franto Ricka

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    (EBRD)

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    Abstract

    This paper investigates the political implications of tax competition between countries of different sizes. We show that smaller countries competing for internationally mobile capital would set lower tax rates than their larger counterparts when run by similar governments. Moreover, small-country governments are actually politically to the right of those in larger countries, adding a second reason for lower tax rates in the former. Then a higher number of small countries competing for capital with large countries not only decreases the large-country tax rates on capital, but also results in more right-wing governments being elected. Small countries thus have ”right-wing power”.

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    Bibliographic Info

    Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 153.

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    Length: 31 pages
    Date of creation: Dec 2012
    Date of revision:
    Publication status: Published in Working papers 153, European Bank for Reconstruction and Development
    Handle: RePEc:ebd:wpaper:153

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    Keywords: tax competition; government; elections;

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    1. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
    2. Harry Huizinga & Gaetan Nicodeme, 2003. "Foreign Ownership and Corporate Income Taxation: An Empirical Evaluation," Public Economics 0310005, EconWPA.
    3. Nicodeme, Gaetan, 2006. "Corporate Tax Competition and Coordination in the European Union: What do we know? Where do we stand?," MPRA Paper 107, University Library of Munich, Germany.
    4. Torsten Persson & Guido Tabellini, 1990. "The Politics of 1992: Fiscal Policy and European Integration," NBER Working Papers 3460, National Bureau of Economic Research, Inc.
    5. Persson, Torsten & Tabellini, Guido, 1994. "Representative democracy and capital taxation," Journal of Public Economics, Elsevier, vol. 55(1), pages 53-70, September.
    6. Kehoe, Patrick J, 1989. "Policy Cooperation among Benevolent Governments May Be Undesirable," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 289-96, April.
    7. Wilson, J.D., 1990. "Tax Competition With Interregional Differences In Factor Endowments," Working Papers 4, John Deutsch Institute for the Study of Economic Policy.
    8. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    9. Peralta, Susana & van Ypersele, Tanguy, 2005. "Factor endowments and welfare levels in an asymmetric tax competition game," Journal of Urban Economics, Elsevier, vol. 57(2), pages 258-274, March.
    10. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
    11. Ravi Kanbur & Michael Keen, 1991. "Jeux Sans Frontieres: Tax Competition and Tax Coordination when Countries Differ in Size," Working Papers 819, Queen's University, Department of Economics.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Small countries are more right wing
      by Economic Logician in Economic Logic on 2013-02-06 15:43:00

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