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Jeux Sans Frontieres: Tax Competition and Tax Coordination when Countries Differ in Size


  • Ravi Kanbur
  • Michael Keen


Closer international integration is putting increasing pressure on existing national tax structures. this paper uses a simple two-country model to address a range of policy concerns that consequently arise, focusing particularly on the role of national size. Differences in size exacerbate the inefficiency due to non-cooperative behavior, harming both countries. The smaller country would lose form harmonization to any tax rate between those of the non-cooperative equilibrium, but both countries would gain from the imposition of a minimum tax anywhere in that range. The fully optimal response to freer cross-border trade, however, may be to do absolutely nothing.

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  • Ravi Kanbur & Michael Keen, 1991. "Jeux Sans Frontieres: Tax Competition and Tax Coordination when Countries Differ in Size," Working Paper 819, Economics Department, Queen's University.
  • Handle: RePEc:qed:wpaper:819

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