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Endogenous Choice on Tax Instruments in a Tax Competition Model: Unit Tax versus Ad Valorem Tax

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Author Info

  • Nobuo Akai

    ()
    (Osaka School of International Public Policy, Osaka University)

  • Hikaru Ogawa

    ()
    (School of Economics, Nagoya University)

  • Yoshitomo Ogawa

    ()
    (Faculty of Economics, Kinki University)

Abstract

This 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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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1001.pdf
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Bibliographic Info

Paper 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.

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Length: 24 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:osk:wpaper:1001

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Web page: http://www.econ.osaka-u.ac.jp/
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Keywords: Tax competition; Unit tax; Ad valorem tax;

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Cited by:
  1. 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.
  2. 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.

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