Partial Tax Coordination in a Repeated Game Setting
35 Pages Posted: 28 Jul 2010
Date Written: July 27, 2010
This paper addresses the problem of partial tax coordination among regional or national sovereign governments in a repeated game setting. We show that partial tax coordination is more likely to prevail if the number of regions in a coalition subgroup is smaller and the number of existing regions in the entire economy is larger. We also show that under linear utility, partial tax coordination is more likely to prevail if the preference for a local public good is stronger. The main driving force for these results is the response of the intensity of tax competition. The increased (decreased) intensity of tax competition makes partial tax coordination more (less) sustainable.
Keywords: partial tax coordination, repeated game, tax competition
JEL Classification: H71, H77
Suggested Citation: Suggested Citation