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Does tax competition increase disparity among jurisdictions?

Author

Listed:
  • Yutao Han

    (University of International Business and Economics, Beijing, China)

  • Patrice Pieretti

    (CREA, Université de Luxembourg)

  • Benteng Zou

    (CREA, Université de Luxembourg)

Abstract

This paper investigates whether a less-developed economy can catch up with a more developed one when they compete for foreign direct investments. The main message of the paper is that jurisdictional competition can enable the lagging country to catch up if capital mobility is sufficiently high and the productivity gap is not too large. Further, we show that size asymmetry reinforces (weakens) the productivity catch-up resulting from interjurisdictional competition when the lagging economy is small (large). Finally, we demonstrate that the development gap widens when capital becomes less mobile, which is at odds with previous findings

Suggested Citation

  • Yutao Han & Patrice Pieretti & Benteng Zou, 2015. "Does tax competition increase disparity among jurisdictions?," DEM Discussion Paper Series 15-07, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:15-07
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    interjurisdictional competition; productivity catch-up; size asymmetry;
    All these keywords.

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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