Factor endowments and welfare levels in an asymmetric tax competition game

Susana Peralta, Tanguy van Ypersele

Research output: Contribution to journalArticlepeer-review

42 Citations (Scopus)

Abstract

This paper addresses capital tax competition among an arbitrary number of countries. Countries are asymmetric not only in their population endowment but also in their capital endowment per inhabitant. National governments tax capital and labor in order to finance a fixed public budget. Asymmetric capital taxation arises at equilibrium leading to a distortion on the international capital market. We fully characterize how equilibrium taxes and welfare levels depend upon countries' population and capital endowments. We compare it to the autarky situation and show that fiscal competition erodes some, but not all, of the gains from capital markets liberalization.

Original languageEnglish
Pages (from-to)258-274
Number of pages17
JournalJournal of Urban Economics
Volume57
Issue number2
DOIs
Publication statusPublished - Mar 2005

Keywords

  • Asymmetric regions
  • Capital mobility
  • Nash equilibrium
  • Tax competition

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