IDEAS home Printed from https://ideas.repec.org/p/sfu/sfudps/dp00-11.html
   My bibliography  Save this paper

Redistribution, Fiscal Competition, and the Politics of Economic Integration

Author

Abstract

The paper examines the redistributive consequences of the economic integration of factor markets. We consider two countries that redistribute income among their residents. The social benefits in each country are financed by a source based tax on capital which is democratically chosen by its inhabitants. If either capital or labour is internationally mobile, the countries engage in fiscal competiton, i.e., the partial integration of capital or labour markets is detrimental to the countries' redistributive ability. A move from partial to full integration, however, may alleviate rather than intensify fiscal competition, particularly, if the two countries face sufficiently similar economic and political conditions. In such a situation, increased integration of labour markets will soften the incentives compete for mobile capital. As a result, there is more redistribution in equilibrium and a majority of the population in each country is strictly better off.

Suggested Citation

  • Anke S. Kessler & Christoph Lulfesmann & Gordon Myers, 2000. "Redistribution, Fiscal Competition, and the Politics of Economic Integration," Discussion Papers dp00-11, Department of Economics, Simon Fraser University, revised Feb 2000.
  • Handle: RePEc:sfu:sfudps:dp00-11
    as

    Download full text from publisher

    File URL: http://www.sfu.ca/econ-research/RePEc/sfu/sfudps/dp00-11.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
    3. Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
    4. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    5. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-633, November.
    6. Wildasin, David E., 1988. "Nash equilibria in models of fiscal competition," Journal of Public Economics, Elsevier, vol. 35(2), pages 229-240, March.
    7. Torsten Persson & Guido Tabellini, 1992. "The Politics of 1992: Fiscal Policy and European Integration," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 689-701.
    8. Bucovetsky, S., 1995. "Rent seeking and tax competition," Journal of Public Economics, Elsevier, vol. 58(3), pages 337-363, November.
    9. Bolton, Patrick & Roland, Gérard, 1995. "The Break up of Nations: A Political Economy Analysis," CEPR Discussion Papers 1225, C.E.P.R. Discussion Papers.
    10. Flatters, Frank & Henderson, Vernon & Mieszkowski, Peter, 1974. "Public goods, efficiency, and regional fiscal equalization," Journal of Public Economics, Elsevier, vol. 3(2), pages 99-112, May.
    11. Roger H. Gordon, 1983. "An Optimal Taxation Approach to Fiscal Federalism," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 567-586.
    12. Cremer, Helmuth & Pestieau, Pierre, 1996. "Distributive implications of European integration," European Economic Review, Elsevier, vol. 40(3-5), pages 747-757, April.
    13. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-774, September.
    14. Keen, Michael, 1987. "Welfare effects of commodity tax harmonisation," Journal of Public Economics, Elsevier, vol. 33(1), pages 107-114, June.
    15. Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-858, August.
    16. Burbidge, John B. & Myers, Gordon M., 1994. "Population mobility and capital tax competition," Regional Science and Urban Economics, Elsevier, vol. 24(4), pages 441-459, August.
    17. Wilson, John Douglas, 1987. "Trade, Capital Mobility, and Tax Competition," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 835-856, August.
    18. Myers, Gordon M., 1990. "Optimality, free mobility, and the regional authority in a federation," Journal of Public Economics, Elsevier, vol. 43(1), pages 107-121, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kangoh Lee, 2012. "Why is mobile capital taxed?," Journal of Economics, Springer, vol. 107(2), pages 157-181, October.
    2. Haufler, Andreas & Lülfesmann, Christoph, 2015. "Reforming an asymmetric union: On the virtues of dual tier capital taxation," Journal of Public Economics, Elsevier, vol. 125(C), pages 116-127.
    3. Becker, Johannes & Fuest, Clemens, 2010. "EU regional policy and tax competition," European Economic Review, Elsevier, vol. 54(1), pages 150-161, January.
    4. Wolf Wagner & Sylvester Eijffinger, 2008. "Efficiency of capital taxation in an open economy: tax competition versus tax exportation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(6), pages 637-646, December.
    5. Thomas Moutos & William Scarth, 2003. "Some Macroeconomic Consequences of Basic Income and Employment Subsidies," CESifo Working Paper Series 916, CESifo Group Munich.
    6. MIYAGIWA Kaz & SATO Yasuhiro, 2015. "Illegal Immigration and Multiple Destinations," Discussion papers 15116, Research Institute of Economy, Trade and Industry (RIETI).
    7. Brulhart, Marius & Jametti, Mario, 2006. "Vertical versus horizontal tax externalities: An empirical test," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 2027-2062, November.
    8. Lisa Grazzini & Alessandro Petretto, 2007. "Tax Competition between Unitary and Federal Countries," Economics of Governance, Springer, vol. 8(1), pages 17-36, January.
    9. Janeba, Eckhard & Wilson, John Douglas, 2011. "Optimal fiscal federalism in the presence of tax competition," Journal of Public Economics, Elsevier, vol. 95(11), pages 1302-1311.
    10. Dima, Bogdan & Dima, Ştefana Maria & Barna, Flavia, 2014. "The signaling effect of tax rates under fiscal competition: A (Shannonian) transfer entropy approach," Economic Modelling, Elsevier, vol. 42(C), pages 373-381.
    11. Lockwood, Ben & Makris, Miltiadis, 2006. "Tax incidence, majority voting and capital market integration," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1007-1025, August.
    12. Makris, Miltiadis, 2006. "Capital tax competition under a common currency," Journal of Urban Economics, Elsevier, vol. 59(1), pages 54-74, January.
    13. Karkalakos, Sotiris & Makris, Miltiadis, 2008. "Capital Tax Competition in the European Union: Theory and Evidence from Two Natural Experiments," MPRA Paper 21437, University Library of Munich, Germany, revised 2010.
    14. Huang, Wei Hong & Chen, Yang & Rudkin, Simon, 2014. "Dynamic Fiscal competition with public infrastructure investment: Austerity and attracting capital inflow," RIEI Working Papers 2014-03, Xi'an Jiaotong-Liverpool University, Research Institute for Economic Integration, revised 02 Mar 2016.
    15. Leon Bettendorf & Joeri Gorter & Albert van der Horst, 2006. "Who benefits from tax competition in the European Union?," CPB Document 125, CPB Netherlands Bureau for Economic Policy Analysis.
    16. Susana Peralta, 2007. "Political Support for Tax Decentralization," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(6), pages 1013-1030, December.
    17. Ihori, Toshihiro & Yang, C.C., 2009. "Interregional tax competition and intraregional political competition: The optimal provision of public goods under representative democracy," Journal of Urban Economics, Elsevier, vol. 66(3), pages 210-217, November.
    18. Kessler, Anke S. & Lulfesmann, Christoph, 2005. "Tiebout and redistribution in a model of residential and political choice," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 501-528, February.

    More about this item

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sfu:sfudps:dp00-11. 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: (Working Paper Coordinator). General contact details of provider: http://edirc.repec.org/data/desfuca.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.