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Capital mobility, tax competition, and lobbying for redistributive capital taxation

  • Lorz, Jens Oliver

This paper analyzes the impact of international capital mobility on redistributive capital taxation and on lobbying activities by interest groups. It employs a model where different capital endowments lead to a conflict between households concerning their most preferred capital tax rate. Three main results are derived: First, redistributive source based capital taxes or subsidies decline as international tax competition intensifies. Second, lobbying activities of certain interest groups may explain international differences in the capital tax rate. Third, capital mobility may lead to declining lobbying activities of interest groups and thus may be welfare increasing for all households.

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 779.

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Date of creation: 1996
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Handle: RePEc:kie:kieliw:779
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  1. Coughlin, Peter J & Mueller, Dennis C & Murrell, Peter, 1990. "Electoral Politics, Interest Groups, and the Size of Government," Economic Inquiry, Western Economic Association International, vol. 28(4), pages 682-705, October.
  2. Razin, Assaf & Sadka, Efraim, 1991. "Efficient investment incentives in the presence of capital flight," Journal of International Economics, Elsevier, vol. 31(1-2), pages 171-181, August.
  3. Assaf Razin & Efraim Sadka, 1989. "International Tax Competition and Gains from Tax Harmonization," NBER Working Papers 3152, National Bureau of Economic Research, Inc.
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  5. Persson, Torsten & Tabellini, Guido, 1992. "The Politics of 1992: Fiscal Policy and European Integration," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 689-701, October.
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  7. Ghosh, Atish R., 1991. "Strategic aspects of public finance in a world with high capital mobility," Journal of International Economics, Elsevier, vol. 30(3-4), pages 229-247, May.
  8. 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.
  9. Tullock, Gordon, 1971. "The Cost of Transfers," Kyklos, Wiley Blackwell, vol. 24(4), pages 629-43.
  10. Gerber, Robert I. & Hewitt, Daniel P., 1987. "Tax competition and redistribution policy of local governments competing for business capital," Journal of Urban Economics, Elsevier, vol. 21(1), pages 69-82, January.
  11. 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.
  12. Hoyt, William H., 1991. "Property taxation, Nash equilibrium, and market power," Journal of Urban Economics, Elsevier, vol. 30(1), pages 123-131, July.
  13. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
  14. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  15. Siebert, Horst & Koop, Michael J., 1990. "Institutional competition: a concept for Europe?," Kiel Working Papers 440, Kiel Institute for the World Economy.
  16. Stefan Sinn, 1992. "The taming of Leviathan: Competition among governments," Constitutional Political Economy, Springer, vol. 3(2), pages 177-196, March.
  17. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
  18. 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.
  19. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
  20. Rauscher, Michael, 1996. "Interjurisdictional competition and the efficiency of the public sector: The triumph of the market over the state?," Kiel Working Papers 732, Kiel Institute for the World Economy.
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