The paper analyzes the conditions under which the smaller of two otherwise identical countries prefers the non-cooperative Nash equilibrium to a situation of fully harmonized tax rates. A standard two-country model of capital tax competition is extended by allowing for transaction costs,...

The increasing economic integration among OECD countries since the late 1970s has attracted much attention in tax policy research. Although several studies have tested whether capital mobility induces a race to the bottom in capital taxation, the two approaches - competition and compensation...

Jurisdictions that engage in inter-regional tax competition usually try to attenuate competitive pressures by substituting salient tax instruments with hidden ones. On this effect, we investigate the efficiency consequences of inter-regional tax competition and fiscal equalization in a federal...

The paper shows that interjurisdictional competition for mobile factors of production forces the government to raise the efficiency of the public sector and, thus, helps to tame Leviathan governments. However, this result is derived under some restrictive assumptions concerning the kind of tax...

The paper studies the role of capital mobility for efficiency of decentralized fiscal policies in a tax competition model where only a distorting wage, the residencebased and the source-based capital tax are available. We extend Bucovetsky and Wilson (1991) in deriving second-best taxation rules...

Capital tax competition is analyzed in a model with a single private and a locally supplied public consumption good. As a benchmark case necessary conditions for efficient interregional tax structures are derived and contrasted with the outcome of beggar thy neighbor strategies. If households...

There is little doubt that the step towards a monetary union in Europe will increase both the distortionary effects of existing differences in national tax systems and the intensity of tax competition for internationally mobile commodity and factor tax bases. This paper discusses selected issues...