Discussion Papers 2016
CIRJE-F-1030 | "Leadership in Tax Ccompetition with Fiscal Equalization Transfers" |
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Author Name | Haraguchi, Junichi and Hikaru Ogawa |
Date | November 2016 |
Full Paper | |
Remarks | Forthcoming in The B.E. Journal of Economic Analysis & Policy |
Abstract |
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We propose a timing game of asymmetric tax competition with fiscal equalization scheme. The study finds that governments tend to play a sequential-move game as the scale of equalization transfer increases, which explains the emergence of tax leaders in tax competition. The presence of a tax leader is likely to exacerbate capital misallocation among countries, suggesting that equalization transfers aimed at narrowing the interregional fiscal gap might cause a problem of efficient capital allocation. |
Keywords: tax competition, endogenous timing, leadership, equalization transfers |