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Are Regional Asymmetries Detrimental to Tax Coordination in a Repeated Game Setting?

Author

Listed:
  • Itaya, Jun-ichi
  • Okamura, Makoto
  • Yamaguchi, Chikara

Abstract

This paper reexamines the main findings of Cardarelli et al. (2002), and Contenaro and Vidal (2006), who show that regional asymmetries undermine the implicit collusion of tax coordination in a repeated game model of capital tax competition. In particular, this paper investigates how increasing regional differences in the per capita capital endowments and/or production technologies affect the willingness of each region to cooperate in achieving tax coordination. It is shown not only that there may exist cases where tax coordination is facilitated with an increase in regional asymmetries increase and the greater the degree of asymmetry in terms of the net capital exports of the regions, but also that the higher the cooperation of the regions with respect to the sustenance of tax coordination.

Suggested Citation

  • Itaya, Jun-ichi & Okamura, Makoto & Yamaguchi, Chikara, 2007. "Are Regional Asymmetries Detrimental to Tax Coordination in a Repeated Game Setting?," Discussion paper series. A 183, Graduate School of Economics and Business Administration, Hokkaido University.
  • Handle: RePEc:hok:dpaper:183
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    References listed on IDEAS

    as
    1. Wilson, John Douglas, 1991. "Tax competition with interregional differences in factor endowments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 423-451, November.
    2. Wildasin, David E., 1989. "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," Journal of Urban Economics, Elsevier, vol. 25(2), pages 193-212, March.
    3. Itaya, Jun-ichi & Okamura, Makoto & Yamaguchi, Chikara, 2006. "Asymmetric Tax Competition in a Repeated Game Setting," Discussion paper series. A 176, Graduate School of Economics and Business Administration, Hokkaido University.
    4. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    5. Haufler, Andreas, 1997. " Factor Taxation, Income Distribution and Capital Market Integration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(3), pages 425-446, September.
    6. Cardarelli, Roberto & Taugourdeau, Emmanuelle & Vidal, Jean-Pierre, 2002. " A Repeated Interactions Model of Tax Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(1), pages 19-38.
    7. Coates, Dennis, 1993. "Property tax competition in a repeated game," Regional Science and Urban Economics, Elsevier, vol. 23(1), pages 111-119, March.
    8. DePeter James A. & Myers Gordon M., 1994. "Strategic Capital Tax Competition: A Pecuniary Externality and a Corrective Device," Journal of Urban Economics, Elsevier, vol. 36(1), pages 66-78, July.
    9. Marco Cotenaro & Jean-Pierre Vidal, 2006. "Implicit tax co-ordination under repeated policy interactions," Recherches économiques de Louvain, De Boeck Université, vol. 72(1), pages 5-18.
    10. 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.
    11. Peralta, Susana & van Ypersele, Tanguy, 2005. "Factor endowments and welfare levels in an asymmetric tax competition game," Journal of Urban Economics, Elsevier, vol. 57(2), pages 258-274, March.
    12. Marco CATENARO & Jean-Pierre VIDAL, 2006. "Implicit tax co-ordination under repeated policy interactions," Discussion Papers (REL - Recherches Economiques de Louvain) 2006011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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