Capital Tax Competition Among an Arbitrary Number of Asymmetric Countries
23 Pages Posted: 21 Feb 2003
Date Written: January 2003
This Paper addresses the issue of capital tax competition among an arbitrary number of countries. Countries are allowed to be asymmetric not only in their population endowment but also in their capital endowment per inhabitant. National governments tax capital and labour in order to finance a public good. Asymmetric capital taxation arises at equilibrium leading to a distortion on the international capital market. We provide conditions for the existence of a Nash equilibrium. We fully characterize how equilibrium taxes and welfare levels depend upon countries' population and capital endowments.
Keywords: Capital mobility, tax competition, Nash equilibrium
JEL Classification: F21, H23, H30, H73
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