Tax Competition, Relative Performance, and Policy Imitation

14 Pages Posted: 15 Nov 2013

See all articles by Andreas Wagener

Andreas Wagener

Leibniz Universit├Ąt Hannover - Economics and Business Administration Area; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Vienna University of Economics and Business Administration

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Date Written: November 2013

Abstract

Rather than about their absolute payoffs, governments in fiscal competition often seem to care about their performance relative to other governments. Moreover, they often appear to mimic policies observed elsewhere. I study such behavior in a standard tax competition game. Both with relative payoff concerns and for imitative policies, evolutionary stability for games with finitely many players is the appropriate solution concept. Independently of the number of jurisdictions involved, an evolutionarily stable tax policy coincides with the competitive outcome of a tax competition game with infinitely many players. It, thus, involves drastic efficiency losses.

Suggested Citation

Wagener, Andreas, Tax Competition, Relative Performance, and Policy Imitation (November 2013). International Economic Review, Vol. 54, Issue 4, pp. 1251-1264, 2013, Available at SSRN: https://ssrn.com/abstract=2354711 or http://dx.doi.org/10.1111/iere.12035

Andreas Wagener (Contact Author)

Leibniz Universit├Ąt Hannover - Economics and Business Administration Area ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Vienna University of Economics and Business Administration ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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