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What do Theories of Tax Competition Predict for Capital Taxes in EU Countries? A Review of the Tax Competition Literature

The paper reviews the theoretical literature on capital tax competition relevant for capital taxation in the European Union. The basic tax competition model a la Zodrow and Mierzkowski (1986) is presented, and the arguments of the literature are subsequently integrated into the framework of the basic tax competition model. The review includes models of tax competition where countries are assumed large, asymmetric, when there are more than one tax instrument, where there are more than one tax base, when government is assumed self-serving, and where democratic elections and political equilibrium are allowed for. Moreover, the consequences of agglomeration economies for tax competition pressures are reviewed and incorporated into the standard tax competition model.

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Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 05-2002.

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Length: 27
Date of creation: Nov 2002
Date of revision:
Handle: RePEc:gii:giihei:heiwp05-2002
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  1. Duane Swank, 1998. "Funding the Welfare State: Globalization and the Taxation of Business in Advanced Market Economies," Political Studies, Political Studies Association, vol. 46(4), pages 671-692, 09.
  2. Jacob Frenkel & Assaf Razin & Efraim Sadka, 1991. "International Taxation in an Integrated World," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512149, June.
  3. Richard E. Baldwin & Paul Krugman, 2002. "Agglomeration, Integration and Tax Harmonization," NBER Working Papers 9290, National Bureau of Economic Research, Inc.
  4. Kind, Hans Jarle & Schjelderup, Guttorm & Ulltveit-Moe, Karen-Helene, 1999. "Competing for Capital in a 'Lumpy' World," CEPR Discussion Papers 2188, C.E.P.R. Discussion Papers.
  5. Jeremy Edwards & Michael Keen, 1994. "Tax competition and Leviathon," IFS Working Papers W94/07, Institute for Fiscal Studies.
  6. 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.
  7. Forslid, Rikard & Andersson, Fredrik, 1999. "Tax Competition and Economic Geography," Research Papers in Economics 2000:5, Stockholm University, Department of Economics.
  8. Isabelle Joumard, 2001. "Tax Systems in European Union Countries," OECD Economics Department Working Papers 301, OECD Publishing.
  9. WILDASIN, David, . "Nash equilibria in models of fiscal competition," CORE Discussion Papers RP 804, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Ottaviano, Gianmarco & van Ypersele, Tanguy, 2002. "Market Access and Tax Competition," CEPR Discussion Papers 3638, C.E.P.R. Discussion Papers.
  11. Persson, Torsten & Tabellini, Guido, 1991. "The Politics of 1992: Fiscal Policy and European Integration," CEPR Discussion Papers 501, C.E.P.R. Discussion Papers.
  12. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
  13. Wilson, J.D., 1990. "Tax Competition With Interregional Differences In Factor Endowments," Working Papers 4, John Deutsch Institute for the Study of Economic Policy.
  14. Razin, Assaf & Sadka, Efraim, 1991. "International tax competition and gains from tax harmonization," Economics Letters, Elsevier, vol. 37(1), pages 69-76, September.
  15. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
  16. Ludema, Rodney D & Wooton, Ian, 1998. "Economic Geography and the Fiscal Effects of Regional Integration," CEPR Discussion Papers 1822, C.E.P.R. Discussion Papers.
  17. Kanbur, Ravi & Keen, Michael, 1991. "Tax competition and tax coordination : when countries differ in size," Policy Research Working Paper Series 738, The World Bank.
  18. Krogstrup, Signe, 2002. "Public debt asymmetries: the effect on taxes and spending in the European Union," Working Paper Series 0162, European Central Bank.
  19. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
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