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International Fiscal Policy Coordination and Competition: An Exposition

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  • Assaf Razin
  • Efraim Sadka

Abstract

The paper highlights key considerations necessary for the analysis of international tax competition and the desirability of international tax harmonization. The analysis of a Nash-Cournot international tax competition is carried out for (1) competing countries that cannot exercise significant market power in the world economy when setting tax rates, (2) competing countries that incorporate the indirect effect on world prices into the tax design and (3) competing governments that are unable to commit themselves to a preannounced path of tax for the entire future. The discussion is carried out by using basic principles of international taxation under full integration of goods and capital world markets.

Suggested Citation

  • Assaf Razin & Efraim Sadka, 1991. "International Fiscal Policy Coordination and Competition: An Exposition," NBER Working Papers 3779, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3779
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    References listed on IDEAS

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    1. Canzoneri, Matthew B. & Henderson, Dale W., 1988. "Is sovereign policymaking bad?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 28(1), pages 93-140, January.
    2. Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," European Economic Review, Elsevier, vol. 34(2-3), pages 489-504, May.
    3. Jacob Frenkel & Assaf Razin & Efraim Sadka, 1991. "International Taxation in an Integrated World," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061430, January.
    4. van der Ploeg, Frederick, 1988. "International policy coordination in interdependent monetary economies," Journal of International Economics, Elsevier, vol. 25(1-2), pages 1-23, August.
    5. Rogoff, Kenneth, 1985. "Can international monetary policy cooperation be counterproductive?," Journal of International Economics, Elsevier, vol. 18(3-4), pages 199-217, May.
    6. Gordon, Roger H, 1986. "Taxation of Investment and Savings in a World Economy," American Economic Review, American Economic Association, vol. 76(5), pages 1086-1102, December.
    7. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Patrick J. Kehoe, 1989. "Policy Cooperation Among Benevolent Governments May Be Undesirable," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 289-296.
    9. Dixit, Avinash, 1985. "Tax policy in open economies," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 6, pages 313-374 Elsevier.
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    Cited by:

    1. Turnovsky, Stephen J & Bianconi, Marcelo, 1992. "The International Transmission of Tax Policies in a Dynamic World Economy," Review of International Economics, Wiley Blackwell, vol. 1(1), pages 49-72, November.
    2. Marco Celentani & J. Ignacio Conde-Ruiz & Klaus Desmet, 2004. "Endogenous Policy Leads to Inefficient Risk Sharing," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 758-787, July.
    3. Rodrik, Dani & van Ypersele, Tanguy, 2001. "Captial mobility, distributive conflict and international tax coordination," Journal of International Economics, Elsevier, vol. 54(1), pages 57-73, June.
    4. Juan Luis Jiménez & Javier Campos, 2004. "Efectos de la descentralización de la política de defensa de la competencia," Documentos de trabajo conjunto ULL-ULPGC 2004-09, Facultad de Ciencias Económicas de la ULPGC.
    5. Lorz, Jens Oliver, 1993. "Der Wettbewerb um international mobiles Kapital: Auswirkungen auf die nationale Finanzpolitik und die intertemporale Kapitalallokation," Kiel Working Papers 608, Kiel Institute for the World Economy (IfW).
    6. Rodrik, D. & van Ypersele, T.P.M.C., 1999. "When does International Capital Mobility Require Tax Coordination?," Discussion Paper 1999-27, Tilburg University, Center for Economic Research.
    7. Siebert, Horst & Koop, Michael J, 1993. "Institutional Competition versus Centralization: Quo Vadis Europe?," Oxford Review of Economic Policy, Oxford University Press, vol. 9(1), pages 15-30, Spring.

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