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Follow the Leader? Evidence on European and US Tax Competition

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  • Rosanne Altshuler
  • Timothy J. Goodspeed

Abstract

This article breaks from the previous empirical literature that estimates Nash tax reaction functions of national governments competing with other national governments assuming that competitors play a Nash game and adjust to a Nash equilibrium in every year. We question this assumption and explore whether one country plays a leadership role in tax competition using data from 1968 to 2008. We test the leadership role of the United States, the United Kingdom, and Germany, and find support for a US leadership role. We also investigate whether countries react differently immediately after watershed tax reforms such as the 1986 US Tax Reform Act or the 1984 UK tax reform. We find some support for a different reaction to the United States following the 1986 US reform, but not for the United Kingdom or Germany.

Suggested Citation

  • Rosanne Altshuler & Timothy J. Goodspeed, 2015. "Follow the Leader? Evidence on European and US Tax Competition," Public Finance Review, , vol. 43(4), pages 485-504, July.
  • Handle: RePEc:sae:pubfin:v:43:y:2015:i:4:p:485-504
    DOI: 10.1177/1091142114527781
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    More about this item

    Keywords

    tax competition; corporate taxes; international taxation;
    All these keywords.

    JEL classification:

    • H0 - Public Economics - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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