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Partial tax coordination in a repeated game setting

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Author Info

  • Jun-ichi Itaya

    ()
    (Hokkaido University)

  • Makoto Okamuraz

    ()
    (Hiroshima University)

  • Chikara Yamaguchix

    ()
    (Hiroshima Shudo University)

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    Abstract

    This paper addresses the problem of partial tax coordination among regional or national sovereign governments in a repeated game setting. We show that partial tax coordination is more likely to prevail if the number of regions in a coalition subgroup is smaller and the number of existing regions in the entire economy is larger. We also show that under linear utility, partial tax coordination is more likely to prevail if the preference for a local public good is stronger. The main driving force for these results is the response of the intensity of tax competition. The increased (decreased) intensity of tax competition makes partial tax coordination more (less) sustainable.

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    Bibliographic Info

    Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2009/15.

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    Length: 33 pages
    Date of creation: 2009
    Date of revision:
    Handle: RePEc:ieb:wpaper:2009/10/doc2009-15

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    Related research

    Keywords: Partial tax coordination; repeated game; tax competition;

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    References

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    1. Cardarelli, Roberto & Taugourdeau, Emmanuelle & Vidal, Jean-Pierre, 2002. " A Repeated Interactions Model of Tax Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(1), pages 19-38.
    2. Conconi, Paola & Perroni, Carlo & Riezman, Raymond, 2007. "Is Partial Tax Harmonization Desirable?," The Warwick Economics Research Paper Series (TWERPS) 795, University of Warwick, Department of Economics.
    3. MARCHAND, Maurice & PESTIEAU, Pierre & SATO, Motohiro, 2002. "Can partial fiscal coordination be welfare worsening ? A model of tax competition," CORE Discussion Papers 2002052, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Konrad, Kai A. & Schjelderup, Guttorm, 1999. "Fortress Building in Global Tax Competition," Journal of Urban Economics, Elsevier, vol. 46(1), pages 156-167, July.
    5. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
    6. Burbidge, John B. & James A. DePater & Gordon M. Meyers & Abhijit Sengupta, 1997. "A Coalition-Formation Approach to Equilibrium Federations and Trading Blocs," American Economic Review, American Economic Association, vol. 87(5), pages 940-56, December.
    7. Marco CATENARO & Jean-Pierre VIDAL, 2006. "Implicit tax co-ordination under repeated policy interactions," Discussion Papers (REL - Recherches Economiques de Louvain) 2006011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    8. Wildasin, David E., 1989. "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," Journal of Urban Economics, Elsevier, vol. 25(2), pages 193-212, March.
    9. Haufler, Andreas, 1997. " Factor Taxation, Income Distribution and Capital Market Integration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(3), pages 425-46, September.
    10. Haufler, Andreas, 1997. "Factor taxation, income distribution and capital market integration," Munich Reprints in Economics 20390, University of Munich, Department of Economics.
    11. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
    12. Marco Cotenaro & Jean-Pierre Vidal, 2006. "Implicit tax co-ordination under repeated policy interactions," Recherches économiques de Louvain, De Boeck Université, vol. 72(1), pages 5-18.
    13. Catenaro, Marco & Vidal, Jean-Pierre, 2003. "Implicit tax co-ordination under repeated policy interactions," Working Paper Series 0259, European Central Bank.
    14. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    15. Itaya, Jun-ichi & Okamura, Makoto & Yamaguchi, Chikara, 2008. "Are regional asymmetries detrimental to tax coordination in a repeated game setting?," Journal of Public Economics, Elsevier, vol. 92(12), pages 2403-2411, December.
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