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A Synthesis of Recent Developments in the Theory of Capital Tax Competition

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  • Signe Krogstrup

    (Institute of Economics, University of Copenhagen)

Abstract

This paper proposes a unifying framework for theories of capital tax competition, and surveys and synthesizes the literature within this framework. The synthesis covers various standard tax competition models, models allowing for leviathan governments and democratic elections, in addition more recent contributions to the literature such as cross hauling of investment and models allowing for agglomeration forces to be associated with capital mobility. The paper illustrates under which assumptions the race to the bottom in tax rates results from increasing capital mobility, and when capital tax rates can be expected to increase as a result of higher capital mobility.

Suggested Citation

  • Signe Krogstrup, 2003. "A Synthesis of Recent Developments in the Theory of Capital Tax Competition," EPRU Working Paper Series 04-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:epruwp:04-02
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    File URL: http://web.econ.ku.dk/epru/files/wp/wp-04-02.pdf
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    References listed on IDEAS

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    1. Wilson, John Douglas, 1991. "Tax competition with interregional differences in factor endowments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 423-451, November.
    2. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
    3. Sylvester C.W. Eijffinger & Wolf Wagner, "undated". "Taxation if Capital is not Perfectly Mobile: Tax Competition versus Tax Exportation," EPRU Working Paper Series 02-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    4. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
    5. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
    6. Fredrik Andersson & Rikard Forslid, 2003. "Tax Competition and Economic Geography," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 279-303, April.
    7. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
    8. Jacob Frenkel & Assaf Razin & Efraim Sadka, 1991. "International Taxation in an Integrated World," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061430, December.
    9. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
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    Cited by:

    1. Franto Ricka, 2012. "The right-wing power of small countries," Working Papers 153, European Bank for Reconstruction and Development, Office of the Chief Economist.
    2. Ozlem Onaran & Valerie Boesch & Markus Leibrecht, 2012. "How Does Globalization Affect The Implicit Tax Rates On Labor Income, Capital Income, And Consumption In The European Union?," Economic Inquiry, Western Economic Association International, vol. 50(4), pages 880-904, October.
    3. Mara (Nandra), Eugenia Ramona, 2007. "Tax Competition in the European Union – Evidence from Panel Data," MPRA Paper 21082, University Library of Munich, Germany, revised 2007.
    4. Gaëtan Nicodème, 2006. "Corporate tax competition and coordination in the European Union: What do we know? Where do we stand?," European Economy - Economic Papers 2008 - 2015 250, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    5. C. Dembour, 2008. "Competition for Business Location: A Survey," Journal of Industry, Competition and Trade, Springer, vol. 8(2), pages 89-111, June.

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    More about this item

    Keywords

    tax competition; capital taxation; capital mobility;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • F2 - International Economics - - International Factor Movements and International Business

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