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Competition over Standards and Taxes

Author

Listed:
  • Valesca Groenert

    (Department of Economics, Vanderbilt University)

  • Myrna Wooders

    (Department of Economics, Vanderbilt University)

  • Ben Zissimos

    (Department of Economics, Vanderbilt University)

Abstract

We show that, in competition between a developed country and a developing country over standards and taxes, the developing country may have a 'second mover advantage.' A key feature of standards is that, unlike public goods as usually defined, all firms do not unanimously prefer higher standard levels. We introduce this feature to an otherwise familiar model of fiscal competition. Three distinct outcomes can be characterized by varying the cost to firms of 'standard mismatch': (1) the outcome may be efficient; (2) the developing country may be a 'standard haven,' where some firms escape excessively high standards in the developed country; (3) there may be a 'race to the top' with standards set excessively high.

Suggested Citation

  • Valesca Groenert & Myrna Wooders & Ben Zissimos, 2008. "Competition over Standards and Taxes," Vanderbilt University Department of Economics Working Papers 0820, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:0820
    as

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    File URL: http://www.accessecon.com/pubs/VUECON/vu08-w20.pdf
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    References listed on IDEAS

    as
    1. Markusen, James R. & Morey, Edward R. & Olewiler, Nancy, 1995. "Competition in regional environmental policies when plant locations are endogenous," Journal of Public Economics, Elsevier, vol. 56(1), pages 55-77, January.
    2. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922.
    3. Davies, Ronald B. & Ellis, Christopher J., 2007. "Competition in taxes and performance requirements for foreign direct investment," European Economic Review, Elsevier, vol. 51(6), pages 1423-1442, August.
    4. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
    5. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Valeska Groenert & Ben Zissimos, 2013. "Developing Country Second-Mover Advantage in Competition Over Environmental Standards and Taxes," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(5), pages 700-728, October.
    2. Zissimos, Ben & Wooders, Myrna, 2008. "Public good differentiation and the intensity of tax competition," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1105-1121, June.
    3. Zissimos, Ben & Wooders, Myrna, 2005. "Relaxing Tax Competition through Public Good Differentation," The Warwick Economics Research Paper Series (TWERPS) 737, University of Warwick, Department of Economics.

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    More about this item

    Keywords

    Fiscal competition; second mover advantage; standards; tax competition;
    All these keywords.

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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