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Leadership in Tax Ccompetition with Fiscal Equalization Transfers

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  • Junichi Haraguchi

    (Graduate School of Economics, The University of Tokyo)

  • Hikaru Ogawa

    (Faculty of Economics, The University of Tokyo)

Abstract

We propose a timing game of asymmetric tax competition with fiscal equalization scheme. The study finds that governments tend to play a sequential-move game as the scale of equalization transfer increases, which explains the emergence of tax leaders in tax competition. The presence of a tax leader is likely to exacerbate capital misallocation among countries, suggesting that equalization transfers aimed at narrowing the interregional fiscal gap might cause a problem of efficient capital allocation.

Suggested Citation

  • Junichi Haraguchi & Hikaru Ogawa, 2016. "Leadership in Tax Ccompetition with Fiscal Equalization Transfers ," CIRJE F-Series CIRJE-F-1031, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2016cf1031
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    Cited by:

    1. Kawachi, Keisuke & Ogawa, Hikaru & Susa, Taiki, 2020. "Endogenous capital supply and equilibrium leadership in tax competition," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 622-634.

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    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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