Tax Competition and the Distribution of Income

23 Pages Posted: 6 Jun 2020

See all articles by Stefan Traub

Stefan Traub

University of the German Federal Armed Forces - Department of Economics; University of the German Federal Armed Forces - DFG Research Group 2104

Hongyan Yang

University of Bremen

Date Written: January 2020

Abstract

In this paper, we provide a two‐country, two‐class model of asymmetric capital tax competition. We show formally that poor people living in small countries can benefit from capital tax competition and therefore they are in favor of it. In order to benefit from capital inflow from larger countries, poor people in smaller countries accept less within‐country income redistribution. As a consequence, between‐country income inequality is increased by tax competition.

Keywords: Capital mobility, inequality, tax progression

Suggested Citation

Traub, Stefan and Yang, Hongyan, Tax Competition and the Distribution of Income (January 2020). The Scandinavian Journal of Economics, Vol. 122, Issue 1, pp. 109-131, 2020, Available at SSRN: https://ssrn.com/abstract=3620269 or http://dx.doi.org/10.1111/sjoe.12343

Stefan Traub (Contact Author)

University of the German Federal Armed Forces - Department of Economics ( email )

Holstenhofweg 85
Hamburg, 22043
Germany

University of the German Federal Armed Forces - DFG Research Group 2104 ( email )

Holstenhofweg 85
Hmaburg, DE 22043
Germany

Hongyan Yang

University of Bremen ( email )

Universitaetsallee GW I
Bremen, D-28334
Germany

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