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Tax Competition and Partial Coordination

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  • Sven Wehke

Abstract

To determine the welfare effects of tax coordination, it is often assumed that one tax is jointly increased and all other policy instruments are held constant. This paper, in contrast, analyzes partial coordination in the sense that each country can still adjust another tax, which is not subject to coordination. In a model with capital and labor taxation, we show that under plausible assumptions the welfare effect of coordinating the capital tax only is then still nonnegative. For a partial coordination of the labor tax, however, the results become ambiguous and depend on the labor-supply elasticity.

Suggested Citation

  • Sven Wehke, 2006. "Tax Competition and Partial Coordination," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(3), pages 416-436, September.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200609)62:3_416:tcapc_2.0.tx_2-v
    DOI: 10.1628/001522106X153455
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    References listed on IDEAS

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    Cited by:

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    3. Sven Wehke, 2007. "Fighting Tax Competition in the Presence of Unemployment: Complete versus Partial Tax Coordination," FEMM Working Papers 07010, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    4. Aronsson, Thomas & Wehke, Sven, 2008. "Public goods, unemployment and policy coordination," Regional Science and Urban Economics, Elsevier, vol. 38(3), pages 285-298, May.
    5. Kaisa Kotakorpi, 2009. "Paternalism and Tax Competition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 125-149, March.

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    More about this item

    Keywords

    factor taxation; fiscal competition; partial coordination;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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