We provide a quantitative assessment of the welfare cost of tax competition or, equivalently, the welfare benefit of international tax policy cooperation. We use a simple multi-country general equilibrium model of a world economy, in which there are two types of cross-country spillovers: the first one is generated by international capital mobility and the second by the presence of an international public good. In the absence of international public goods, although welfare in the non-cooperative case is typically lower than in the cooperative case, the welfare difference is negligible quantitatively. Things change drastically, both quantitatively and qualitatively, once we introduce international public goods. Now, there can be big benefits from cooperation and welfare effects cease to be monotonic.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
15844.
Find related papers by JEL classification: H4 - Public Economics - - Publicly Provided Goods H2 - Public Economics - - Taxation, Subsidies, and Revenue
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