Public Debt Asymmetries and Tax Competition
The paper investigates the effect of asymmetric debt and debt servicing obligations on taxes and primary spending in a standard tax competition model, assuming public debts are pre-determined and in their steady state. The impact of increasing financial market integration and capital mobility on tax and spending asymmetries is then investigated, and the results are tested empirically for EU countries. The model predicts that cross country asymmetries in debt servicing obligations lead to cross-country asymmetries in taxes and spending, and these predictions are supported by the data, with high-debt EU countries having lower expenditures and higher taxes than low-debt countries. Moreover, as the impact of increasing capital mobility on tax asymmetries is theoretically ambiguous and empirically insignificant, increasing capital mobility is found to amplify debt-induced tax distortion asymmetries. Finally, higher capital mobility is found to amplify public spending asymmetries theoretically as well as empirically across EU member countries.
|Date of creation:||Aug 2002|
|Date of revision:||Dec 2003|
|Contact details of provider:|| Postal: Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark|
Phone: (+45) 3532 4411
Fax: +45 35 32 30 00
Web page: http://www.econ.ku.dk/epru/
More information through EDIRC
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.:
- 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.
- Wilson, J.D., 1990. "Tax Competition With Interregional Differences In Factor Endowments," Working Papers 4, John Deutsch Institute for the Study of Economic Policy.
- Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
- 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.
- Perotti, Roberto & Kontopoulos, Yianos, 2002. "Fragmented fiscal policy," Journal of Public Economics, Elsevier, vol. 86(2), pages 191-222, November.
- Hali J. Edison & Michael W. Klein & Luca Ricci & Torsten Sloek, 2002.
"Capital Account Liberalization and Economic Performance: Survey and Synthesis,"
NBER Working Papers
9100, National Bureau of Economic Research, Inc.
- Hali J. Edison & Michael W. Klein & Luca Antonio Ricci & Torsten Sløk, 2004. "Capital Account Liberalization and Economic Performance: Survey and Synthesis," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 1-2.
- Torsten M Sloek & Michael W Klein & Luca A Ricci & Hali J Edison, 2002. "Capital Account Liberalization and Economic Performance; Survey and Synthesis," IMF Working Papers 02/120, .
- repec:ntj:journl:v:52:y:1999:i:n._2:p:269-304 is not listed on IDEAS
- A. Bhargava & L. Franzini & W. Narendranathan, 2006.
"Serial Correlation and the Fixed Effects Model,"
World Scientific Book Chapters,
in: Econometrics, Statistics And Computational Approaches In Food And Health Sciences, chapter 4, pages 61-77
World Scientific Publishing Co. Pte. Ltd..
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(2), pages 269-304, June.
- Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
When requesting a correction, please mention this item's handle: RePEc:kud:epruwp:04-01. 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: (Thomas Hoffmann)
If references are entirely missing, you can add them using this form.