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Who gains from capital market integration? Tax competition between unionized and non‐unionized countries

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  • Hikaru Ogawa
  • Yasuhiro Sato
  • Toshiki Tamai

Abstract

The welfare effects of capital market integration are examined under a model of tax competition with two asymmetric countries. The asymmetry is expressed through the labour market: one country has a perfect labour market whereas the other country's labour market is unionized. Our results indicate that the welfare effects of capital market integration differ depending on whether governments are active or passive in attracting capital. In the absence of active governments, capital market integration benefits the country with a competitive labour market whereas it harms the unionized country. Capital market integration benefits both countries if governments are active and compete for mobile capital using taxes/subsidies. Qui gagne en conséquence de l’intégration du marché du capital : concurrence fiscale entre pays syndiqués et non‐syndiqués. Dans cet article, on y examine les effets de bien‐être associés à l’intégration du marché du capital, en regard d’un modèle de concurrence fiscale entre deux pays asymétriques. L’asymétrie s’exprime dans le marché du travail : un pays a un marché parfait du travail, alors que dans l’autre il y a syndicalisation. Les résultats indiquent que les effets de bien‐être de l’intégration du marché du capital diffèrent selon que les gouvernements sont actifs ou passifs quand il s’agit d’attirer du capital. Quand les gouvernements ne font pas d’efforts actifs pour attirer du capital, l’intégration crée des avantages pour le pays qui a un marché du travail concurrentiel et, inversement, désavantage le pays syndiqué. L’intégration du marché du capital avantage les deux pays si tous deux sont actifs et se concurrencent pour avoir accès au capital mobile en utilisant taxes et subventions.

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  • Hikaru Ogawa & Yasuhiro Sato & Toshiki Tamai, 2016. "Who gains from capital market integration? Tax competition between unionized and non‐unionized countries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(1), pages 76-110, February.
  • Handle: RePEc:wly:canjec:v:49:y:2016:i:1:p:76-110
    DOI: 10.1111/caje.12191
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    Cited by:

    1. MORITA Tadashi & SAWADA Yukiko & YAMAMOTO Kazuhiro, 2016. "Subsidy Competition, Imperfect Labor Market, and Endogenous Entry of Firms," Discussion papers 16096, Research Institute of Economy, Trade and Industry (RIETI).
    2. MORITA Tadashi & OGAWA Yoshitomo & ONO Yoshiyasu, 2017. "Corporate Tax Competition in the Presence of Unemployment," Discussion papers 17118, Research Institute of Economy, Trade and Industry (RIETI).
    3. Tadashi Morita & Yasuhiro Sato & Kazuhiro Yamamoto, 2016. "Demographics and tax competition in political economy," Discussion Papers in Economics and Business 16-13, Osaka University, Graduate School of Economics.
    4. Atsushi Yamagishi, 2019. "Transboundary pollution, tax competition and the efficiency of uncoordinated environmental regulation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(3), pages 1165-1194, August.
    5. Olena, Sokolovska, 2017. "Corporate tax incidence and its implications for the labor market," MPRA Paper 83401, University Library of Munich, Germany.
    6. Keisuke Kawata, 2013. "Capital market integration and optimal employment protection policies," IDEC DP2 Series 3-9, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    7. Satoshi Kasamatsu & Hikaru Ogawa, 2020. "International capital market and repeated tax competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 751-768, June.
    8. OGAWA Hikaru & OSHIRO Jun & SATO Yasuhiro, 2012. "Capital Mobility—a resource curse or blessing? How, when, and for whom?," Discussion papers 12063, Research Institute of Economy, Trade and Industry (RIETI).
    9. Tadashi Morita & Yasuhiro Sato & Kazuhiro Yamamoto, 2020. "Demographics and competition for capital in political economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(4), pages 865-889, August.
    10. Mizuki Komura & Hikaru Ogawa, 2019. "Capital market integration and gender inequality," Review of Development Economics, Wiley Blackwell, vol. 23(3), pages 1387-1413, August.

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

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