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Equilibrium Leadership in Tax Competiton Models with Capital Ownership: A Rejoinder

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  • Jean HINDRIKS
  • Yukihiro NISHIMURA

Abstract

This paper reconciles two opposite results in the tax competition literature. On one side Kempf and Rota-Graziosi (J.Pub. Econ 94:768-776, 2010) and Hindriks and Nishimura (J. Pub Econ 121:66-68, 2015) have shown that the two Stackelberg outcomes prevail as the subgame perfect equilibria when capital is entirely owned by non-residents. On the other side Ogawa (Int. Tax Pub Fin 20:474-484, 2013) has shown that the simultaneous- move outcome prevails when capital is entirely owned by residents. We develop a model in which capital ownership can vary freely between these two polar cases. We show that there exists a unique degree of residential capital ownership such that the equilibrium switches from the Stackelberg to the simultaneous-move outcomes. The chance for the simultaneous-move outcome to prevail increases with the extent of asymmetry among regions.
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Suggested Citation

  • Jean HINDRIKS & Yukihiro NISHIMURA, 2016. "Equilibrium Leadership in Tax Competiton Models with Capital Ownership: A Rejoinder," LIDAM Reprints CORE 2758, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2758
    Note: In : International Tax and Public Finance, Journal 10797, 1-12, 2016
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    Cited by:

    1. Hikaru Ogawa & Atsushi Yamagishi, 2016. "Ad Valorem Capital Tax Competition," CIRJE F-Series CIRJE-F-1030, CIRJE, Faculty of Economics, University of Tokyo.
    2. Sharma, Ajay & Pal, Rupayan, 2019. "Nash equilibrium in tax and public investment competition," International Review of Economics & Finance, Elsevier, vol. 62(C), pages 106-120.
    3. Magnus Hoffmann & Grégoire Rota‐Graziosi, 2020. "Endogenous timing in the presence of non‐monotonicities," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 359-402, February.
    4. Yukihiro Nishimura & Kimiko Terai, 2016. "The Direction of Strategic Delegation and Voter Welfare in Asymmetric Tax Competition Models," Discussion Papers in Economics and Business 16-27, Osaka University, Graduate School of Economics.
    5. Takaaki Hamada, 2020. "Endogenous Timing in Tax Competition: The Effect of Asymmetric Information," Discussion Paper Series DP2020-22, Research Institute for Economics & Business Administration, Kobe University, revised Sep 2022.
    6. Haraguchi Junichi & Ogawa Hikaru, 2018. "Leadership in Tax Competition with Fiscal Equalization Transfers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(3), pages 1-15, July.
    7. Hikaru Ogawa & Taiki Susa, 2017. "Majority voting and endogenous timing in tax competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(3), pages 397-415, June.
    8. Jean Hindriks & Yukihiro Nishimura, 2021. "Taxing multinationals: The scope for enforcement cooperation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(3), pages 487-509, June.
    9. Yukihiro Nishimura & Kimiko Terai, 2021. "Electoral Commitment in Asymmetric Tax-competition Models," Discussion Papers in Economics and Business 20-21-Rev., Osaka University, Graduate School of Economics.
    10. Kawachi, Keisuke & Ogawa, Hikaru & Susa, Taiki, 2020. "Endogenous capital supply and equilibrium leadership in tax competition," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 622-634.
    11. Yukihiro Nishimura & Kimiko Terai, 2021. "Electoral Commitment in Asymmetric Tax-competition Models," Discussion Papers in Economics and Business 20-21, Osaka University, Graduate School of Economics.
    12. Jun‐ichi Itaya & Chikara Yamaguchi, 2023. "Endogenous leadership and sustainability of enhanced cooperation in a repeated interactions model of tax competition: Endogenous leadership in tax competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 276-300, April.
    13. Takaaki Hamada, 2023. "Endogenous timing in tax competition: The effect of asymmetric information," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(3), pages 570-614, June.

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    More about this item

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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