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Tax competition and harmonization where tastes for public goods differ

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  • Zineb Abidi

    (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel)

  • Emmanuelle Taugourdeau

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper analyzes how differences in countries’ preferences for public goods affect the stability of coalitions. In a three-country framework, we show how heterogeneity in public goods preferences can shape countries’ decisions to sign up for capital tax rate harmonization agreements (partial or full). In the context of asymmetric preferences, we identify situations in which these discrepancies make harmonization either cost-effective or harmful. We find that countries with similar preferences have an incentive to commit to capital tax harmonization. However, partial harmonization is only stable if the difference in preferences with the outsider is relatively large. A sufficiently high level of capital supply is also required to limit the effects of tax competition on the outsider.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Zineb Abidi & Emmanuelle Taugourdeau, 2023. "Tax competition and harmonization where tastes for public goods differ," Post-Print hal-04510526, HAL.
    • Handle: RePEc:hal:journl:hal-04510526
    DOI: 10.1007/s10797-023-09781-1
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    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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