Partial Tax Coordination in a Repeated Game Setting

35 Pages Posted: 28 Jul 2010

See all articles by Jun-ichi Itaya

Jun-ichi Itaya

Hokkaido University - Division of Modern Economics and Management

Makoto Okamura

Hiroshima University - Economics

Chikara Yamaguchi

Hokkaido University - Graduate School of Economics & Business Administration

Date Written: July 27, 2010

Abstract

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

Itaya, Jun-ichi and Okamura, Makoto and Yamaguchi, Chikara, Partial Tax Coordination in a Repeated Game Setting (July 27, 2010). CESifo Working Paper Series No. 3127. Available at SSRN: https://ssrn.com/abstract=1649316

Jun-ichi Itaya (Contact Author)

Hokkaido University - Division of Modern Economics and Management ( email )

Sapporo 060-0809
Japan

Makoto Okamura

Hiroshima University - Economics ( email )

1-2-1 Kagamiyama
Higashi-Hiroshima
Japan

Chikara Yamaguchi

Hokkaido University - Graduate School of Economics & Business Administration

Kita-ku Kita 9 Nishi 7
Sapporo, Hokkaido, 060
Japan

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