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Are Small countries leaders of the European tax competition ?


  • Nicolas Chatelais

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Institut CDC pour la recherche - Institut CDC pour la recherche)

  • Mathilde Peyrat

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, ESSEC Business School - Ecole Supérieure des Sciences Economiques et Commerciales)


The aim of this paper is to develop a better understanding of the literature dealing with strategic fiscal behaviours of small EU countries using estimations of tax reaction functions of competing national governments. Deriving a simple model of tax competition in a Nash and Stackelberg game, we use panel data and tools from spatial econometrics to examine the role of small countries in tax competition within the enlarged European Union. We find that interactions are stronger among smaller EU countries than between larges ones and rates set in small countries influence those in big countries. Finally, small countries located in the centre of the EU have more influence on tax policies choices of big countries than small countries located in the periphery of EU.

Suggested Citation

  • Nicolas Chatelais & Mathilde Peyrat, 2008. "Are Small countries leaders of the European tax competition ?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00332479, HAL.
  • Handle: RePEc:hal:cesptp:halshs-00332479
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    References listed on IDEAS

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    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. Michael P. Devereux & Simon Loretz, 2013. "What Do We Know About Corporate Tax Competition?," National Tax Journal, National Tax Association, vol. 66(3), pages 745-774, September.
    3. Markus Leibrecht & Claudia Hochgatterer, 2012. "Tax Competition As A Cause Of Falling Corporate Income Tax Rates: A Survey Of Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 26(4), pages 616-648, September.
    4. repec:kap:itaxpf:v:24:y:2017:i:3:d:10.1007_s10797-016-9424-1 is not listed on IDEAS
    5. Hendel, Ulrich, 2012. "The Influence of Altruistic Preferences on the Race to the Bottom of Welfare States," Discussion Papers in Economics 13999, University of Munich, Department of Economics.

    More about this item


    small countries; Strategic interactions; tax behaviours; spatial econometrics; European Union; tax competition; small countries.; Union Européenne; fiscalité; comportements stratégiques; économétrie spatiale; concurrence; fonction de réponse.;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)


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