Models of tax competition usually assume a single period framework. This paper sets up a repeated interactions model of tax competition, and establishes conditions under which fiscal policy harmonization can result from repeated interactions between governments. It is shown that fiscal policy harmonization can not prevail when regional asymmetries are too strong. In such a case, the only way out is to set up a central fiscal authority.
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Find related papers by JEL classification: F2 - International Economics - - International Factor Movements and International Business H2 - Public Economics - - Taxation, Subsidies, and Revenue
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