Self-Enforcing Capital Tax Coordination

Arbeitspapier

Capital tax competition is known to result in inefficiently low tax rates and an undersupply of public goods. The provision of public goods and with it the welfare of all countries can be enhanced via tax coordination. Based on the standard Zodrow-Mieszkowski-Wilson tax-competition model this paper analyses the conditions under which tax coordination by a group of countries is self-enforcing. It is shown that there always exists a rather small stable tax coalition. For some subset of the parameter space the grand coalition may be stable as well, even if the total number of countries is large. The small stable coalition is not very effective in mitigating the inefficiency of the non-cooperative Nash equilibrium. The ineffectiveness is increasing in the total number of countries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4454

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; State and Local Government; Intergovernmental Relations: General ; State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
• Subject: tax coordination ; tax competition ; coalition ; self-enforcing

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Eichner, Thomas ; Pethig, Rüdiger
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/89664
• Last update: 10.03.2025, 11:42 AM CET