Does Size Asymmetry Exacerbate the Inefficiency of Tax Competition?

10 Pages Posted: 8 Sep 2013

See all articles by Yutao Han

Yutao Han

Universite du Luxembourg

Patrice Pieretti

Universite du Luxembourg; Centre de Recherche en Économie Appliquée (CREA)

Benteng Zou

Centre de Recherche en Économie Appliquée (CREA)

Date Written: August 22, 2013

Abstract

Many authors demonstrate that the tax gap resulting from tax competition increases with the size asymmetry of the competing countries. Consequently, increasing country-size disparities exacerbates the inefficiency of tax competition. The aim of this note is to show that this classical view has no general validity if we consider that countries compete not only in taxes but also in the provision of infrastructure. The simple model we develop for this purpose demonstrates that the effect of size disparity on efficiency depends crucially on the degree of international capital mobility.

Keywords: tax competition, social welfare, inefficiency, infrastructure

JEL Classification: H21, H73, F21

Suggested Citation

Han, Yutao and Pieretti, Patrice and Zou, Benteng, Does Size Asymmetry Exacerbate the Inefficiency of Tax Competition? (August 22, 2013). Institute of Mathematical Economics Working Paper No. 486, Available at SSRN: https://ssrn.com/abstract=2321898 or http://dx.doi.org/10.2139/ssrn.2321898

Yutao Han

Universite du Luxembourg ( email )

L-1511 Luxembourg
Luxembourg

Patrice Pieretti

Universite du Luxembourg ( email )

L-1511 Luxembourg
Luxembourg

Centre de Recherche en Économie Appliquée (CREA) ( email )

Campus Limpertsberg
162A, avenue de la Faïencerie
Luxembourg, 1511
Luxembourg

Benteng Zou (Contact Author)

Centre de Recherche en Économie Appliquée (CREA) ( email )

Campus Limpertsberg
162A, avenue de la Faïencerie
Luxembourg, 1511
Luxembourg

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
23
Abstract Views
379
PlumX Metrics