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Tax Competition and the Distribution of Income

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  • Stefan Traub
  • Hongyan Yang

Abstract

In this paper, we provide a two‐country, two‐class model of asymmetric capital tax competition. We show formally that poor people living in small countries can benefit from capital tax competition and therefore they are in favor of it. In order to benefit from capital inflow from larger countries, poor people in smaller countries accept less within‐country income redistribution. As a consequence, between‐country income inequality is increased by tax competition.

Suggested Citation

  • Stefan Traub & Hongyan Yang, 2020. "Tax Competition and the Distribution of Income," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(1), pages 109-131, January.
    • Handle: RePEc:bla:scandj:v:122:y:2020:i:1:p:109-131
    DOI: 10.1111/sjoe.12343
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