The Politics of 1992: Fiscal Policy and European Integration
The internal market in Europe will greatly increase the international mobility of resources. How will this affect fiscal policy in different countries? We first consider taxation of capital in a two-country model, where a democratically-chosen government in each country chooses tax policy. Higher capital mobility changes the politico-economic equilibrium in two ways. On one hand, it leads to more tax competition between the countries: this `economic effect' tends to lower tax rates in both countries. On the other hand, it alters voters' preferences and makes them elect a different government: this `political effect' offsets the increased tax competition, although not completely. We then consider taxation of labour, in a model where labour is internationally immobile. Eliminating the remaining barriers to trade in goods changes the distribution of labour earnings in the model, which again has a political as well as an economic effect. Again the economic and political effects push the tax rates in different directions, but here the political effect can prevail. The tendency for an adapting political equilibrium to preserve the status quo emerges as a general result of the paper.
|Date of creation:||Jan 1991|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Persson, Torsten & Tabellini, Guido, 1994. "Representative democracy and capital taxation," Journal of Public Economics, Elsevier, vol. 55(1), pages 53-70, September.
- Alberto Giovannini & James R. Hines, Jr., 1990.
"Capital Flight and Tax Competition: Are There Viable Solutions to Both Problems?,"
NBER Working Papers
3333, National Bureau of Economic Research, Inc.
- Giovannini, Alberto & Hines Jr, James R, 1990. "Capital Flight and Tax Competition: Are there Viable Solutions to Both Problems," CEPR Discussion Papers 416, C.E.P.R. Discussion Papers.
- Giovannini, A. & Hines, J.R.J., 1990. "Capital Flight And Tax Competition: Are There Viable Solutions To Both Problems?," Papers 51, Princeton, Woodrow Wilson School - Discussion Paper.
- Roger H. Gordon, 1983. "An Optimal Taxation Approach to Fiscal Federalism," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 567-586.
- Roger H. Gordon, 1982. "An Optimal Taxation Approach to Fiscal Federalism," NBER Working Papers 1004, National Bureau of Economic Research, Inc.
- Wildasin, David E., 1988. "Nash equilibria in models of fiscal competition," Journal of Public Economics, Elsevier, vol. 35(2), pages 229-240, March.
- WILDASIN, David, "undated". "Nash equilibria in models of fiscal competition," CORE Discussion Papers RP 804, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Wildasin, D.E., 1987. "Nash equilibria in models of fiscal competition," CORE Discussion Papers 1987020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Peter A. Diamond, 1982. "Protection, Trade Adjustment Assistance, and Income Distribution," NBER Chapters,in: Import Competition and Response, pages 123-150 National Bureau of Economic Research, Inc.
- Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, vol. 46(2), pages 317-330, March.
- Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
- Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:501. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.