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Tax Incidence, Majority Voting And Capital Market Integration

  • Lockwood, Ben

    (Department of Economics and CSGR)

  • Makris, Miltiadis

    (Department of Economics, University of Exeter, CMPO, University of Bristol and IMOP, Athens University of Economics and Business)

We re-examine, from a political economy perspective, the standard view that higher capital mobility results in lower capital taxes - a view, in fact, that is not confirmed by the available empirical evidence. We show that when a small economy is opened to capital mobility, the change of incidence of a tax on capital - from capital owners to owners of the immobile factor - may interact in such a way with political decision-making so as to cause a rise in the equilibrium tax. This can happen whether or not the fixed factor (labour) can be taxed.

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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 712.

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Length: 27 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:wrk:warwec:712
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  8. 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.
  9. Kessler, Anke S. & Lulfesmann, Christoph & Myers, Gordon M., 2003. "Economic versus political symmetry and the welfare concern with market integration and tax competition," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 847-865, May.
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  18. 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.
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