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Are regional asymmetries detrimental to tax coordination in a repeated game setting?

  • Itaya, Jun-ichi
  • Okamura, Makoto
  • Yamaguchi, Chikara
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    This paper reexamines the main findings of Cardarelli et al. [Cardarelli, R., Taugourdeau, E., Vidal, J.-P., 2002. A repeated interactions model of tax competition, Journal of Public Economic Theory 4, 19-38], and Catenaro and Vidal [Catenaro, M., Vidal, J.-P., 2006. Implicit tax co-ordination under repeated policy interactions, Recherches Economiques de Louvain 72, 1-17], who show that regional asymmetries undermine the implicit collusion of tax coordination in a repeated game model of capital tax competition. In particular, this paper investigates how increased regional differences in per capita capital endowments and/or production technologies affect the willingness of each region to cooperate in achieving tax coordination. It is shown that there may exist cases where as regional asymmetries in net capital exporting positions increase, regions are more likely to cooperate on capital taxes and thereby achieve tax coordination.

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    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 92 (2008)
    Issue (Month): 12 (December)
    Pages: 2403-2411

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    Handle: RePEc:eee:pubeco:v:92:y:2008:i:12:p:2403-2411
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    1. Peralta, Susana & van Ypersele, Tanguy, 2005. "Factor endowments and welfare levels in an asymmetric tax competition game," Journal of Urban Economics, Elsevier, vol. 57(2), pages 258-274, March.
    2. Haufler, Andreas, 1997. "Factor taxation, income distribution and capital market integration," Munich Reprints in Economics 20390, University of Munich, Department of Economics.
    3. Cardarelli, R. & Taugourdeau, E. & Vidal, J.-P., 1999. "A Repeated Interactions Model of Tax Competition," Papiers d'Economie Mathématique et Applications 1999.73, Université Panthéon-Sorbonne (Paris 1).
    4. Coates, Dennis, 1993. "Property tax competition in a repeated game," Regional Science and Urban Economics, Elsevier, vol. 23(1), pages 111-119, March.
    5. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
    6. Wilson, J.D., 1990. "Tax Competition With Interregional Differences In Factor Endowments," Working Papers 4, John Deutsch Institute for the Study of Economic Policy.
    7. Marco Cotenaro & Jean-Pierre Vidal, 2006. "Implicit tax co-ordination under repeated policy interactions," Recherches économiques de Louvain, De Boeck Université, vol. 72(1), pages 5-18.
    8. Marco CATENARO & Jean-Pierre VIDAL, 2006. "Implicit tax co-ordination under repeated policy interactions," Discussion Papers (REL - Recherches Economiques de Louvain) 2006011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    9. DePeter James A. & Myers Gordon M., 1994. "Strategic Capital Tax Competition: A Pecuniary Externality and a Corrective Device," Journal of Urban Economics, Elsevier, vol. 36(1), pages 66-78, July.
    10. Wildasin, David E., 1989. "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," Journal of Urban Economics, Elsevier, vol. 25(2), pages 193-212, March.
    11. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    12. Itaya, Jun-ichi & Okamura, Makoto & Yamaguchi, Chikara, 2006. "Asymmetric Tax Competition in a Repeated Game Setting," Discussion paper series. A 176, Graduate School of Economics and Business Administration, Hokkaido University.
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