Endogenous Choice on Tax Instruments in a Tax Competition Model: Unit Tax versus Ad Valorem Tax
AbstractThis paper analyzes an endogenous choice problem with regard to tax instruments in a capital tax competition model. Considering a symmetric and two-region model of tax competition, where each region is allowed to choose either unit or ad valorem tax, we show that selecting unit tax as a policy instrument is the dominant strategy of governments. An interpretation of this result is clearly explained by the properties of the best response curves.
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Bibliographic InfoPaper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 10-01.
Length: 24 pages
Date of creation: Jan 2010
Date of revision:
Tax competition; Unit tax; Ad valorem tax;
Find related papers by JEL classification:
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-01-30 (Accounting & Auditing)
- NEP-ALL-2010-01-30 (All new papers)
- NEP-PBE-2010-01-30 (Public Economics)
- NEP-PUB-2010-01-30 (Public Finance)
- NEP-URE-2010-01-30 (Urban & Real Estate Economics)
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- Hikaru Ogawa & Hiroshi Aiura, 2012. "Unit Tax versus Ad Valorem Tax: A Tax Competition Model with Cross-border Shopping," ERSA conference papers ersa12p428, European Regional Science Association.
- Runkel, Marco & Hoffmann, Magnus, 2012.
"Why Countries Compete in Ad Valorem Instead of Unit Capital Taxes,"
Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century
62079, Verein für Socialpolitik / German Economic Association.
- Magnus Hoffmann & Marco Runkel, 2012. "Why Countries Compete in Ad Valorem Instead of Unit Capital Taxes," CESifo Working Paper Series 3893, CESifo Group Munich.
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