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Is Fiscal Cooperation always Sustainable when Regions Differ in Size? Lessons for the EMU

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  • Emmanuelle Taugourdeau

Abstract

This paper investigates the sustainability of fiscal co-ordination between two regions according to three criteria of co-ordination: tax harmonization, fiscal cooperation and bargaining. We show that in a two-region model in which regions differ in size, bargaining is the only sustainable co-ordination policy when trigger types strategies are implemented. The sustainability of cooperative fiscal policy or tax harmonization depends on the degree of difference in regions' size. When this difference is large, such co-ordinated policies are not sustainable.

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  • Emmanuelle Taugourdeau, 2004. "Is Fiscal Cooperation always Sustainable when Regions Differ in Size? Lessons for the EMU," Annals of Economics and Statistics, GENES, issue 75-76, pages 11-36.
    • Handle: RePEc:adr:anecst:y:2004:i:75-76:p:11-36
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    File URL: http://www.jstor.org/stable/20079093
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    Cited by:

    1. Wang, Wenming & Kawachi, Keisuke & Ogawa, Hikaru, 2017. "Does equalization transfer enhance partial tax cooperation?," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 431-443.
    2. Satoshi Kasamatsu & Hikaru Ogawa, 2020. "International capital market and repeated tax competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 751-768, June.

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