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Federal tax autonomy and the limits of cooperation
[Föderale Steuerautonomie und die Grenzen der Kooperation]

Listed author(s):
  • Kessing, Sebastian G.
  • Konrad, Kai A.
  • Kotsogiannis, Christos

We consider the hold-up problem between a foreign direct investor and the government(s) in a host country with weak governmental structure and lack of power to commit. Using Nash threats, we show that an efficient investment level can be sustained for a sufficiently high discount factor and ask whether a federal structure makes collusion more or less sustainable. We show that collusion between the government and the investor is easier to sustain if the host country is more centralized or if the government layers can commit to fixed sharing rules.

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File URL: https://www.econstor.eu/bitstream/10419/51147/1/507313410.pdf
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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Processes and Governance with number SP II 2005-18.

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Date of creation: 2005
Handle: RePEc:zbw:wzbmpg:spii200518
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  22. Berkowitz, Daniel & Li, Wei, 2000. "Tax rights in transition economies: a tragedy of the commons?," Journal of Public Economics, Elsevier, vol. 76(3), pages 369-397, June.
  23. Michael Keen & Christos Kotsogiannis, 2003. "Leviathan and Capital Tax Competition in Federations," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 177-199, 04.
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