commodity tax harmonization and the location of industry we study the positive implications of commodity taxation and tax harmonization under the destination and origin principles when firms are monopolistic competitors facing variable demand elasticity and segmented markets our emphasis is on the international location of firms in the presence of market size asymmetries and trade costs under the destination principle an increase in the tax rate of a country always causes some firms to relocate to the other this effect may be reversed under the origin principle when economic integration is deep enough under tax harmonization the choice of a common tax principle is irrelevant for the market outcomes and for the global tax revenues it affects however the distribution of revenues between small and large countries c 2006 elsevier b v all rights reserved

tax competition and the creation of redundant products there are products that are assembled from kits but that once assembled are identical to other products an example is the roll your own cigarette because the kit requires time to assemble it is more costly than the assembled product in the absence of tax competition the kit is not bought or is redundant i show that tax competition between regions supports strategies that tax the redundant product at a lower tax rate than its assembled counterpart and it is bought a welfare loss is thereby created jel classification h71 bien des produits peuvent etre assembles a partir de trousses une fois assembles ces produits sont identiques a d autres produits un exemple est le fait de rouler ses propres cigarettes parce que la trousse reclame du temps pour l assemblage le produit coute plus cher que le produit deja assemble en l absence de concurrence fiscale on n achete pas la trousse ou elle est redondante on montre que la concurrence fiscale entre regions supporte des strategies qui taxent le produit redondant a un taux plus bas que sa contrepartie assemblee et que ce produit redondant est achete une perte de bien etre s ensuit

who gains from capital market integration tax competition between unionized and non unionized countries the welfare effects of capital market integration are examined under a model of tax competition with two asymmetric countries the asymmetry is expressed through the labour market one country has a perfect labour market whereas the other country s labour market is unionized our results indicate that the welfare effects of capital market integration differ depending on whether governments are active or passive in attracting capital in the absence of active governments capital market integration benefits the country with a competitive labour market whereas it harms the unionized country capital market integration benefits both countries if governments are active and compete for mobile capital using taxes subsidies

does competition for capital discipline governments decentralization globalization and public policy competition among countries or regions within them to attract mobile capital is often thought to discipline their governments motivating them to invest more in infrastructure reduce waste and corruption and spend less on non productive public goods the result should be convergence on business friendly policies we argue that this requires an assumption units start out very similar that is often unrealistic if units are heterogeneous in natural resources geographical location inherited human capital or infrastructure capital mobility often weakens discipline on the poorlyendowed units this may help explain disappointing results of liberalizing capital flows within russia and sub saharan africa jel f36 h73 h87

managerial bonuses and subordinate mistreatment abstract can performance bonuses increase the likelihood that managers coerce their subordinates into exerting high levels of effort when doing so promotes neither efficiency nor equity we consider a laboratory setting in which managers compete to obtain a large bonus at the end of the experiment and the probability of obtaining it depends partly on the effort exerted by the subordinates we find that managers are more than twice as likely to punish subordinates exerting fair levels of effort if they compete for individual bonuses than when there are no bonuses this is not the case when they compete for pooled bonuses giving managers discretionary power over how to share them with their subordinates as most subordinates willingly exert maximal effort a model in which individuals are assumed to care about equity captures subordinates behavior well managers willingness to coerce subordinates into exerting unfairly high levels of effort on the other hand cannot be readily accounted for by any of the existing models of social preferences

tax competition and tax co ordination under destination and origin principles a synthesis this paper proposes a general framework for analysing commodity tax competition under destination and origin principles based on three possible tax spillovers the consumer price spillover the producer price terms of trade spillover and rent spillovers a model is presented which can be extended to accommodate all three spillovers using this model many of the results in the existing literature can be derived compared and extended

a theory of interregional tax competition a general equilibrium model is constructed to study tax competition where local governments compete for capital by holding down property tax rates and public expenditure levels an exact definition of tax competition is provided and both the existence and nonexistence of tax competition are shown to be theoretically possible it is argued however that tax competition must occur under empirically reasonable conditions inefficiency in public production is also explicitly modeled the amount of capital used to produce a given level of public service output is shown to be greater than that which is required to minimize costs evaluated at the prices facing private firms

heterogeneous vertical tax externalities and macroeconomic effects of federal tax changes the role of fiscal advantage abstract how do state tax rates respond to federal tax shocks this paper presents a novel mechanism of heterogeneous vertical tax externalities across state levels of fiscal advantage showing that tax increases can be expansionary even without their reinvestment states rich in natural resources have a fiscal advantage in the inter state competition over production factors which allows them to respond better to increases in federal taxes and consequently attract capital from other parts of the nation we add heterogeneity in fiscal advantage levels to an otherwise standard model of vertical tax externalities and horizontal tax competition the model shows that irrespective of federal redistribution the contractionary effect of a federal tax increase can be overturned in fiscally advantaged states through an increase in their tax base using the case of the u s and narrative based measures of federal tax shocks a la romer and romer 2010 we provide empirical evidence for the various aspects of this mechanism specifically our baseline estimates indicate that controlling for federal transfers a 1 increase in the gdp share of capital related federal taxes at the beginning of a year increases the growth rate of the per capita tax base by approximately 0 7 in high fiscal advantage states at the end of it

competition and cooperation in the workplace abstract this paper examines promotion systems which are competitive a tournament or noncompetitive a quota scheme we introduce helping technologies where some aid to co workers is efficient and consider various worker bargaining strategies it is shown that the competitive scheme consistently prevents helping efforts while the non competitive scheme induces an efficient allocation of effort if workers bargain over help because the non competitive scheme is less risky it may dominate the competitive scheme even if workers do not help each other if workers bargain over help the non competitive scheme will typically enhance welfare

incentive equivalence with fixed migration costs abstract if migration between communities is costless and if policy makers in each community anticipate the migration response to policy changes then the interests of the two communities are perfectly aligned decentralization is efficient this incentive equivalence is well known however the first order approach used in virtually all the literature may obscure the fact that no convexity assumptions need be made about technology or tastes this fact underscores the relevance of incentive equivalence even when there are scale economies in the public sector here the consequences of positive migration costs for this incentive equivalence are considered in contrast with much of the literature migration costs are assumed the same for everyone this formulation differs from the more common attachment to home assumption of heterogeneous migration costs conditional on the direction of migration interests of different communities are still perfectly aligned but natives of different communities may prefer different directions of migration weakening incentive equivalence if local policy makers have the power to induce large changes in migration flows however incentive equivalence fails only if economies of scale in population are important so that communities may be under populated

international tax competition and the deficit bias i analyze the dynamic effects of tax competition on public budget deficits i find that stronger tax competition leads to a fiscal deficit bias at the early stages of financial liberalization when countries differ in terms of capital mobility further liberalization leads to external imbalances and diverging fiscal deficits while corporate tax rates converge consistent with theory i find that stronger tax competition increases deficits in a sample of oecd countries controlling for tax revenues and other standard determinants of fiscal deficits jel e62 f62

why do most countries set high tax rates on capital abstract we consider tax competition in a world with tax bases exhibiting different degrees of mobility modeled as mobile and immobile capital an agreement among countries not to give preferential treatment to mobile capital results in an equilibrium where mobile capital is nevertheless taxed relatively lightly in particular one or two of the smallest countries measured by their stocks of immobile capital choose relatively low tax rates thereby attracting mobile capital away from the other countries which are then left to set revenue maximizing taxes on their immobile capital this conclusion holds regardless of whether countries choose their tax policies sequentially or simultaneously in contrast unrestricted competition for mobile capital results in the preferential treatment of mobile capital by all countries without cross country differences in the taxation of mobile capital nevertheless our main result is that the non preferential regime generates larger expected global tax revenue despite the sizable revenue loss from the emergence of low tax countries by extending the analysis to include cross country differences in productivities we are able to resurrect a case for preferential regimes but only if the productivity differences are sufficiently large

economic contests comparative reward schemes contests are situations in which an individual s reward depends on his performance relative to others students are graded on a curve the candidate with the most votes gets the political office the underling who performs best is promoted to the executive position contests are useful in dealing with indivisible rewards reducing monitoring costs and minimizing risks from common uncertainties they are employed to sort potential participants and once they have entered to induce appropriate effort from them with monitoring precision and prize spreads as potential choice variables optimal contest structures are derived for fair and unfair contests among equal and unequal participants the converse problems of climbing low ability individuals enter the contest designed for high ability candidates and slumming are shown to be manageable

learning by helping a bounded rationality model of mentoring abstract within an organization a bounded rational principal organizes a promotion contest based on a sequence of tests regarding candidates relative performances we assume the principal to suffer from limited ability to rank the performances only identifying the best in each test furthermore he satisfies the expected profit from promotion designing the contest such that expected gains do not decrease with the information generated by additional tests then mentoring is shown to improve the information about candidates ability when the principal offers help to the current best candidate provided by a manager promoted after a similar contest

income taxes and the destination of movers to multistate msas abstract we examine how differences in state income tax rates as well as other state and local taxes and public service expenditures influence the choice of state of residence for households federal tax filers moving into multistate metropolitan areas msas using data from the irs on the migration of taxpayers msas that are on borders provide a spatial discontinuity discrete differences in state tax rates within a single labor market these msas allow residents to live in one state and work in another state we find that differences in state income tax rates have a significant impact on the relative rate of migration to the states within an msa however contrary to what would be expected this impact is only significant in msas in which the filing state is based on employment states without reciprocity and not for those states in which the filing state is the state of residence states with reciprocity in msas where states do not have reciprocity agreements a difference of ten percent in tax rates leads to a 4 1 percent difference in the relative rate of incoming taxpayers analogously we find that a ten percent difference in state tax rates in these msas results in a 3 3 percent difference in the rate of tax base inflow agi our results suggest that one reason that differences in state income taxes appear to have more impact in multistate msas without reciprocity is that only relatively large differences in state income tax rates have any impact on migration and these differences are much more pronounced in msas without reciprocity

patient mobility and health care quality when regions and patients differ in income we study the effects of cross border patient mobility on health care quality and welfare when income varies across and within regions we use a salop model with a high middle and low income region in each region a policy maker chooses health care quality to maximise the utility of its residents when health care costs are financed by general income taxation in equilibrium regions with higher income offer better quality which creates an incentive for patient mobility from lower to higher income regions assuming a prospective payment scheme based on drg pricing we find that lower non monetary administrative mobility costs have i no effect on quality or welfare in the high income region ii a negative effect on quality but a positive effect on welfare for the middle income region and iii ambiguous effects on quality and welfare for the low income region lower monetary mobility costs copayments might reduce welfare in both the middle and low income region thus health policies that stimulate cross border patient mobility can be counterproductive when regions differ in income

the envelope theorem and comparative statics of nash equilibria the envelope theorem for nash equilibria shows that the strategic reaction of the other players in the game is important for determining how parameter perturbations affect a given player s indirect objective function the fundamental comparative statics matrix of nash equilibria for theithplayer in ann player static game includes the equilibrium response of the othern 1players in the game to the parameter perturbation and is symmetric positive semidefinite subject to constraint this result is fundamental in that it holds for all sufficiently smooth nash equilibria and is independent of any curvature or stability assumptions imposed on the game journal of economic literatureclassification numbers c72 c61

revenue sharing and information exchange under non discriminatory taxation the international exchange of tax information and its merits compared to withholding taxes is the central topic in current debates in international tax policy the purpose of this paper is to characterize and compare the tax regimes that emerge with and without information exchange under the assumption that countries are unable to differentiate between the taxes they apply to residents and non residents it focuses in particular on the role of asymmetries in country size capturing a key feature of tax havens and on the impact and potential desirability of schemes to share the revenue raised by withholding as under the new eu savings tax arrangements or more innovatively as a consequence of information exchange it is shown that irrespective of country size difference pareto efficiency requires that all revenue collected from nonresidents be transferred to the residence country which would require taking the eu practice even further from the norm but is currently the norm in relation to information exchange a withholding scheme with revenue fully reallocated in this way pareto dominates information sharing whatever the allocation under the latter comparing schemes in which there is no revenue sharing however shows that information exchange pareto dominates simple withholding

in a world without borders the impact of taxes on internet commerce the rapid rise in sales over the internet and the fact that most internet buyers pay no sales tax has ignited a considerable debate over taxes and the internet this paper uses new data on the purchase decisions of approximately 25 000 online users to examine the effect of local sales taxes on internet commerce the results suggest that controlling for observable characteristics people living in high sales taxes locations are significantly more likely to buy online the results are quite robust and cannot be explained by unobserved technological sophistication shopping costs or other alternative explanations the magnitudes in the paper suggest that applying existing sales taxes to internet commerce might reduce the number of online buyers by up to 24 percent

horizontal and vertical indirect tax competition theory and some evidence from the usa this paper provides a simple theoretical framework for analysing simultaneous vertical and horizontal competition in excise taxes and estimates equations informed by the theory on a panel of us state and federal excise taxes on cigarettes and gasoline we also examine the role played by smuggling the results are generally consistent with the theory when the characteristics of the markets for the goods are taken into account for neither good do federal excise taxes affect state taxes taxes in neighbouring states have a significant and large effect in the case of cigarettes and a much weaker effect in the case of gasoline we also find that in the setting of cigarette taxes concerns about cross border shopping play a more important role than concerns about smuggling

on pareto improving commodity tax changes under fiscal competition this paper shows that when a noncooperative fiscal equilibrium of the mintz tulkens 1986 model of tax competition is inefficient pareto improving changes are positive for the taxes of both regions under concavity of the regions welfare functions it also identifies a class of such equilibria that are always efficient

local fiscal competition an application to sales taxation with multiple federations abstract local sales tax rates influence the location of retail activity this paper develops a theory and empirical identification strategy for studying sales tax competition with multiple federations as exemplified by multiple counties each containing several cities in addition to strategic interactions with nearby cities and a city s own county city tax rates are influenced by the tax rates of neighboring counties cities react heterogeneously to own county sales tax rates depending on distance to the county border using data on the driving time to county borders and a comprehensive cross section of local sales tax rates i exploit variation in proximity to county borders to identify vertical fiscal competition cities located near county borders react more intensely to their county s tax rate in comparison to towns at the interior an increase in the neighboring county tax rate raises city tax rates in nearby counties

losing to win tournament incentives in the national basketball association the focus of tournament models has been rank order compensation schemes whereby participants receive higher payments for higher relative performance either incrementally or winner takes all our research focuses on a unique tournament that offers rewards for both winning and losing specifically the national basketball association s regularly scheduled season of games we examine three nba seasons to determine whether team performance responded to changes in the underlying tournament incentives provided by the nba s introduction and restructuring of the lottery system to determine draft order our results yield strong evidence that nba teams are more likely to lose when incentives to lose are present

information policy in tournaments with sabotage sabotage is one of the main problems of tournament like reward schemes workers who are leading in a tournament are more dangerous rivals and are therefore sabotaged more heavily this implies that there is an extra cost to becoming a leader and hence to choosing high productive effort in the early stages of a tournament the incentives to exert productive effort are thereby reduced we show that this problem can be solved by concealing intermediate information on the performances of workers i e by clever information management moreover we offer experimental evidence indicating that such information management does increase productive efforts

the political economy of regional integration projects at borders where poor and rich meet the role of cross border shopping and community sorting abstract at borders between poor and rich countries huge service price differentials could be exploited to mutual benefit offering better paid job opportunities to the poor as well as better shopping opportunities to the rich however cross border shopping is often limited by the substantial transaction costs of crossing the border moreover countries and regions frequently fail to cut these transaction costs even when they have the opportunity to do so we provide a politico economic analysis of cross border integration projects more specifically we show how the political outcome depends on i intra country mobility ii decision making and housing ownership regimes and iii federal grants and international border regulations our analysis builds on two key characteristics in which individuals differ interregional mobility and intercultural ability

tax evasion fiscal competition and economic integration abstract this paper examines the implications of tax evasion for fiscal competition and tax harmonization policies in an economic union first for symmetric countries it proves that the equilibrium values of the tax and audit rates are less than optimal tax harmonization alone will also lead to a less than optimal audit rate second for asymmetric countries the paper shows that integration may turn an honest country into an evading one it argues that tax harmonization alone may be a bad policy in that it can make both countries worse off it may also cause an otherwise honest country to turn to evasion

international tax coordination regionalism versus globalism tax competition for mobile capital can undermine the attempts of governments to redistribute income from rich to poor i study whether international tax coordination can alleviate this problem using a general equilibrium model synthesizing recent contributions to the tax competition literature the model highlights the crucial distinction between global tax coordination and regional coordination with high capital mobility between the tax union and the rest of the world the welfare gain from regional capital income tax coordination is only a small fraction of the gain from global coordination even if the tax union is large relative to the world economy

reforming an asymmetric union on the virtues of dual tier capital taxation the tax competition for mobile capital in particular the reluctance of small countries to agree on measures of tax coordination has ongoing political and economic fallouts within europe we analyse the effects of introducing a two tier structure of capital taxation where the asymmetric member states of a union choose a common federal tax rate in the first stage and then non cooperatively set local tax rates in the second stage we show that this mechanism effectively reduces competition for mobile capital between the members of the union moreover it distributes the gains across the heterogeneous states in a way that yields a strict pareto improvement over a one tier system of purely local tax choices we also discuss the effects of diverging capital endowments within the union and capital flows to third countries

eu regional policy and tax competition the european union eu provides coordination and financing of trans european transport infrastructures i e roads and railways which link the eu member states and reduce the cost of transport and mobility this raises the question of whether eu involvement in this area is justified by inefficiencies of national infrastructure policies moreover an often expressed concern is that policies enhancing mobility may boost tax competition we analyze these questions using a model where countries compete for the location of profitable firms we show that a coordination of investment in transport cost reducing infrastructures within union countries enhances welfare and mitigates tax competition in contrast with regard to union periphery infrastructure the union has an interest in a coordinated reduction of investment expenditures here the effects on tax competition are ambiguous our results provide a rationale for eu level regional policy that supports the development of intra union infrastructure

technology and tax systems abstract technological innovations facilitating e commerce have had major effects on consumer behavior and firm organization in the retail sector but the effects of these new transaction technologies on fiscal systems remain unknown we extend models of commodity tax competition to include multiple types of commodities trade and remote commerce assuming in accordance with current policy that e commerce is taxed at destination while cross border shopping is taxed at origin when the cost of online shopping falls we show that equilibrium tax rates and revenues decrease in large core jurisdictions but increase in small peripheral ones reducing tax differentials policy commentators warn that e commerce erodes tax revenue true enough for some governments but more accurately changing transaction costs can generate entirely new commercial and fiscal equilibria that ultimately redistribute tax revenues from jurisdictions with concentrations of traditional vendors toward others with some reinterpretation the model is also adapted to analyze profit tax competition when firms can respond to high taxes both through profit shifting and through relocation each dependent on transactions costs changes in technology may again redistribute tax revenues from high tax to low tax jurisdictions

policy competition for foreign direct investment between asymmetric countries the present paper analyses policy competition for foreign direct investment between countries of different size and different market structure we demonstrate how policy competition affects the location decision of the foreign investor and derive welfare implications the key variables in our analysis are intra regional trade costs differences in market size and minimum wages

the impact of fuel tourism on retailers diesel price in spanish neighbouring regions since 1986 car fuel consumption in spain has been subject to the special hydrocarbons tax and the value added tax in addition since 2002 regional governments have been able to apply a regional excise duty on hydrocarbons this article analyses the impact that such a regional tax has on the retailer s diesel price at the border of the province of lugo in the region of galicia and the province of leon in the region of castile leon only the former region has the regional tax evidence shows that variations in the price of diesel at the border of lugo are of the same sign but of lower intensity than at the border of leon the price price elasticity is 0 8060 these results suggest that service stations located in regions with higher excise duties use their price policy to lessen the negative effects generated for fuel tourism

which border taxes origin and destination regimes with fiscal competition in output and emission taxes abstract this paper posits a two stage game in tax regime and tax rates to study the property of second best emission and output taxes in a two country world with an atmospheric externality it shows that i either the destination destination or the origin origin tax regime may constitute the subgame perfect nash equilibrium of this game ii either regime may pareto dominate the other iii it is possible to have a prisoner s dilemma game where the origin origin regime pareto dominates but the choice of the destination regime is the dominant strategy for each country other results include iv under origin origin regime the output tax is used for fiscal competition the emission tax is set at a rate equal to the national marginal social damage of emissions and public goods are provided suboptimally v under destination destination regime the output tax is ineffective as an instrument for fiscal competition the emission tax is used not only for combating pollution but also for tax competition the tax is set at a rate below the national marginal social damage of emissions emissions are pushed above their closed economy level the provision of public goods are optimal

state and local tax competition in a spatial model with sales taxes and residential property taxes abstract this paper presents a theoretical model with a uniformly populated line that is divided into local jurisdictions and or states if one level of government imposes sales and residential property taxes and if the spatial extent of each taxing jurisdiction is positive and finite then in nash equilibrium the sales tax rate is less than residential property tax rate housing consumption is suboptimal and the public good is underprovided in each jurisdiction if a very large state or country is divided into local jurisdictions and if both levels of government choose tax rates endogenously then under some assumptions there is an efficient outcome

taxing an independent scotland if scotland were to become independent it would gain considerably more control over its tax system than it currently enjoys in this paper we consider the consequences of independence for the optimal design of a new scottish tax system an analysis which would also be of some relevance for considering the consequences for tax design of independence of other smaller nations scotland is different from the rest of the uk in some ways that are important for tax system design incomes are more equally distributed for example that is one reason why the progressive income tax currently raises less per head in scotland than in the rest of the uk it also suggests that there is less to be gained in terms of redistribution from sharply progressive taxation independence would create additional complexity for individuals and firms working or trading across borders it could also put downward pressure on tax rates and our analysis suggests that optimal tax rates in an independent scotland are likely to be lower than optimal rates in the uk as a whole at the same time the context of a substan tial budget deficit will continue to put upward pressure on tax rates

did the single market cause competition in excise taxes evidence from eu countries tax competition theory predicts that the introduction of the eu single market in 1993 should have caused excise tax competition and thus increased strategic interaction in the setting of excise taxes among eu countries we test this prediction using a panel data set of 12 eu countries over the period 1987 2004 we find that for excise duties on still and sparkling wine beer and ethyl alcohol strategic interaction significantly increased after 1993 there is weaker evidence of increased interaction in cigarette taxes possibly because cigarettes are widely smuggled giving rise to tax competition even before the single market

a simple model of commodity taxation and cross border shopping this paper sets up a simple model in which two countries differing in geographical extent engage in commodity tax competition originating in opportunities for cross border shopping the non cooperative tax equilibrium and various coordination initiatives are examined in the benchmark model and in two model extensions incorporating i costs of transportation for goods and ii border inspection among the more surprising results are the following with i pure profits accrue to sellers near the border but subjecting them to tax may lower the country s total tax revenue with ii the volume of cross border shopping may well increase jel classification h20 h87 h26

bank secrecy illicit money and offshore financial centers this paper discusses the effects of pressure policies on offshore financial centers as well as their ability to enforce the compliance of those centers with anti money laundering regulations offshore banks can be encouraged to comply with rigorous monitoring of an investor s identity and the origin of his her funds when pressure creates a sufficiently high risk of reputational harm to the investor we show that such pressure policies harm both offshore and onshore investors and can benefit both the bank industry and tax administrations we show that social optimal pressure policies are dichotomous decisions between no pressure at all and a pressure great enough to persuade offshore banks to comply the delegation of pressure policies to onshore tax institutions may be inefficient deeper financial integration fosters compliance by the offshore center

a collective tournament abstract traditional tournaments among workers yield suboptimal levels of helping efforts while collective incentives generate free riding or lack incentive compatibility we confront these problems using a tournament between workplaces under fairly restrictive conditions the collective tournament is first best and incentive compatible

national treatment at the wto the roles of product and country heterogeneity this paper analyzes the world trade organization s wto s national treatment nt clause in a two country model where quality of goods and or market size are heterogenous across countries when market size is symmetric across countries a reciprocal nt agreement i benefits the high quality country ii hurts the low quality country and iii delivers higher aggregate world welfare however such an agreement can arise in equilibrium if the high quality country s market is relatively bigger and the quality gap between goods is small i e goods are sufficiently alike the qualitative nature of these results does not change when quality is endogenously determined

does size asymmetry exacerbate the inefficiency of tax competition 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

commodity tax competition between member states of a federation equilibrium and efficiency we first describe regional market equilibria whereupon consumers of each region allocate their purchases of private goods between domestic and nondomestic ones according to the structure of relative prices taxes and transportation costs next regional optimal tax levels and public good quantities are derived the tax of the other region being held constant fiscal competition arises from the ability of one region in choosing its tax to alter the tax base of the other

using cost observation to regulate firms the paper emphasizes the use of accounting data in regulatory or procurement contracts when the supplier 1 has superior information about the cost of the project and 2 invests in cost reduction the main result states that under risk neutrality the supplier announces an expected cost and is given an incentive contract linear in cost overruns this optimal contract moves toward a fixed price contract as the announced cost decreases an investment choice is then introduced and the use of a rate of return regulation is studied

tax compliance and fiscal externalities evidence from u s diesel taxation abstract fiscal externalities across jurisdictions can arise from tax evasion and avoidance while the tax competition literature has generally focused on base shifting and the resulting positive fiscal externalities we show theoretically and empirically that negative fiscal externalities can dominate when the tax base is apportioned across jurisdictions this can lead to a negative relationship between jurisdiction size and the desired tax rate interstate truckers in the united states owe state diesel taxes based on diesel consumption which is apportioned based on the miles driven in each state we find that own state diesel sales fall when the diesel tax rates of other states rise suggesting that tax base evasion is the predominant source of externalities we then estimate a tax reaction specification finding that the own state tax rate is negatively correlated with the tax rates set in other states and with state size both consistent with the sign of the estimated fiscal externality

paternalism and tax competition when consumers make mistakes the government may wish to use paternalistic taxation as a corrective measure we analyse the extent to which tax competition undermines the feasibility of paternalistic taxation we show that the paternalistic component of a tax on a harmful good is reduced when there is cross border shopping but it does not disappear altogether in a model with tax competition between two countries only one of which has a paternalistic objective we show that a minimum tax rate requirement can be pareto improving despite the divergence in policy objectives tax harmonization however reduces welfare in the non paternalistic country

tax evasion tax competition and the gains from nondiscrimination the case of interest taxation in europe this paper uses a game tlieoredc approach to analyse the taxadon of interest income in europe in the presence of tax evasion the model allows tis to assess the success of various reform proposals we argue tbat the tax treatment of nonresidents interest income plays a crucial role when decisions on discriminatio n and on withholding tax rates are made noncooperadvely the outcome is similar to a prisoners dilemma all countries discriminate but in equilihrium internationally mobile portfolio capital evades taxation successfully in contrast if all governments did not discriminate tax competition leads to less tax evasion the integration of capital markets in europe has hrought various benefits at the same time however governments struggle to contain tax evasion international capital flight as an attempt to evade taxes is particularly relevant in the area of taxation of interest income banking secrecy laws in some eu countries and low tax rates in small countries like luxembourg which hoost its role as financial centre have led to the effective elimination ofthe taxation of interest income for some investors the economist speaks not surprisingly about the disappearing taxpayer may 31 1997 several proposals have been made in order to overcome this situation the european commission supports the introduction of a minimum tax rate and or the status of a community resident under the concept of a community resident a country s tax on interest income is independent of the residence of the investor practically realising the source principle by contrast a proposal of the oecd 1977 argues in favour of a maximum withholding tax rate on interest income none of these proposals has been unanimously accepted since gains and losses from non coordinated policies differ greatly across member states the main beneficiary of the present situation is luxembourg which attracts large amounts of foreign capital in particular from germany the united kingdom opposes any coordination for political reasons and because tax coordination may also threaten london s role as the leading financial centre in europe in contrast germany sticks to its traditional bank secrecy law which enables resident investors to evade german taxation by investing abroad

the simple analytics of tobacco taxation with illegal supply this paper examines the impact of tobacco excise taxes where legal and illegal supplies coexist the government s objective is to minimize cigarettes smoked in the economy or to maximize revenue or to minimize illegal activity it reacts to a competitive illegal supply in an adjoining jurisdiction a model of consumer choice is used to demonstrate how demand response to tax changes can yield counterintuitive results while the model mimics the canadian market similar situations characterize the us and european markets a novel element of the paper is the treatment of externalities on the supply side rather than the demand side resume analytique simple des taxes sur le tabac quand il y a offre illegale ce memoire examine l impact des taxes sur la vente de tabac quand des offres legale et illegale coexistent l objectif du gouvernement est de minimiser les cigarettes fumees dans l economie ou de maximiser le revenu fiscal ou de minimiser l activite illegale il doit prendre en compte l offre concurrentielle illegale dans une juridiction contigue on utilise un modele de choix du consommateur pour montrer comment la reaction de la demande aux changements dans les taxes peut engendrer des resultats contre intuitifs bien que le modele soit concu pour le marche canadien on trouve des situations avec des caracteristiques similaires dans les marches americain et europeens un element novateur du memoire est sa prise en compte des externalites du cote de l offre plutot que du cote de la demande

implementing tax coordination abstract this paper investigates whether tax competition can survive under tax coordination when information is private or nonverifiable we focus on a two jurisdiction model where capital can move across borders and where jurisdictions have different public good requirements but are otherwise identical in this setting coordination may call for a second best allocation supported by differentiated tax rates if however coordination must be achieved via a set of common rules that condition tax rates on jurisdictions choices the second best allocation may not be implementable we show that incentive compatibility requirements will generally affect not only the choice of coordinated rates in states where jurisdictions are different but also the choice of harmonized rates in states where jurisdictions have identical preferences for public consumption

nash equilibrium tariffs for the united states and canada the roles of country size scale economies and capital mobility a theoretical analysis of optimal nash equilibrium tariff rates is presented a numerical general equilibrium model is then used to find nash equilibrium tariff rates for the united states and canada the nash equilibrium tariffs are small relative to partial equilibrium estimates 18 percent for the united states and 6 percent for canada the united states is essentially indifferent between the nash equilibrium and free trade while canada is better off at the latter by 4 billion empirical results support theoretical predictions that the optimal tariff is smaller when the country is smaller there are scale economies and free entry and capital is internationally mobile

who benefits from partial tax coordination in this paper we investigate whether partial tax coordination is beneficial to countries within and outside a tax union in which countries are supposed to compete in taxes and infrastructure our results demonstrate that a subgroup of countries agreeing on a common tax rate can harm both member and nonmember states this is in contrast to the classical findings that partial tax harmonisation is pareto improving when a minimum tax rate is imposed within a tax union we demonstrate that it does not necessarily improve the welfare of the member countries moreover both the high tax and low tax countries can be worse off this conclusion is at odds with the classical result that a high tax country benefits from the imposition of a lower tax bound

endogenous timing in the presence of non monotonicities the aim of this paper is to generalize the endogenous timing game proposed by hamilton and slutsky games and economic behavior 1990 2 pp 29 46 by allowing the payoff or the marginal payoff of a player to become non monotonic with respect to the strategy of the opponent we propose a taxonomy of the subgame perfect nash equilibria based on the characteristics of the payoff functions proposed by eaton canadian journal of economics 2004 37 pp 805 29 we determine under which conditions of the initial payoff functions commitment has a social value and when the simultaneous move nash equilibrium is commitment robust and discuss its pareto efficiency

commodity tax competition under destination and origin principles abstract this paper studies the effect of switching from the destination to the origin principle of taxation on non cooperative commodity tax equilibrium when taxes are constrained to be uniform across commodities the switch has no effect when differentiated taxes are allowed the effects of the switch depend on whether countries are small or large in both cases the switch imposes the requirement that taxes must be uniform across commodities within each country in the second case there are two further effects of the switch i negative spillover effects from tax policy are introduced ii incentives to manipulate the terms of trade are changed the switch does not necessarily lead to a fall in all tax rates

the spatial incidence of local retail taxation this paper examines the effects of local retail taxation in two simple models of spatial competition suppose that a suburb or central city imposes an excise tax or subsidy on a particular commodity such as gasoline liquor restaurant meals or groceries or imposes a general sales tax that affects many commodities simultaneously to what extent does this lead to higher prices within the jurisdiction and in neighboring jurisdictions section ii presents the basic model of spatial competition that forms a component of the fixed locations model of section iii and the entry model of section iv infinitely many stores are located along an infinite line and demand density is completely inelastic and uniform along the line the main endogenous variables of interest are the prices charged by the different stores throughout the paper a nash equilibrium in prices is assumed section iii presents the fixed locations model in which the tax is imposed after stores have already established themselves store locations are fixed due to location specific sunk costs if a suburb containing a single store imposes an excise tax on a commodity the store that is taxed and its first second and third nearest neighbors on each side increase their prices by 57 7 percent 15 5 percent 4 2 percent and 1 1 percent of the tax respectively this result is independent of the spacing of the stores and independent of whether or not they are evenly spaced if a suburb containing several stores imposes an excise tax the changes in price follow directly by adding the effects of taxes on several adjacent stores if a central city taxes all stores on the right half line the results are given by 12 the taxed and untaxed stores closest to the boundary

prices taxes and automotive fuel cross border shopping abstract the aim of the present paper is to determine whether differences in automotive fuel prices among neighboring autonomous communities i e spanish political administrative regions affect the decisions taken by individuals regarding the region in which to purchase fuel in particular the intention is to discover if price increases in certain autonomous communities as a result of the application of the regional tranche of the hydrocarbon retail sales tax hrst has affected fuel purchases in neighboring communities in order to achieve the above mentioned objectives the monthly purchases of automotive diesel in aragon between january 2001 and march 2007 is estimated from the fuel price in aragon the relation between prices in each of the bordering communities and aragon weighted by density of traffic the number of vehicles registered in that community and three dummy variables representative of the implementation of the regional tranche of the hrst in madrid catalonia and valencia the paper finds empirical evidence to demonstrate a positive effect of the relative prices in the neighboring communities and vehicle registrations and also a negative effect of prices in aragon upon the acquisition of diesel in this region in the case of catalonia some evidence suggests that the price effect may have been strengthened following the introduction of the regional tranche of the hrst in august 2004

how to make the metropolitan area work neither big government nor laissez faire we study how political boundaries and tax competition among jurisdictions interact with the labor and land markets to determine the economic structure and performance of metropolitan areas contrary to general belief institutional fragmentation and cross border commuting need not be welfare decreasing but the size of the central city matters for welfare under tax competition the central business district is too small tax competition also prevents public policy enhancing global productivity to produce their full impact although our results support the idea of decentralizing the supply of local public services by independent jurisdictions they also highlight the need of coordinating tax policies

economic freedom and taxation is there a trade off in the locational competition between countries this paper investigates the relationshipbetween economic freedomand taxation we argue that an economicallyfree environment improvesthe attractiveness of a location which inturn enables governmentsto levy higher business taxes to test thishypothesis empirically weestimate the impact of economic freedom onthe national tax policy where the latter is measured by thecorporate tax revenue related tognp corporate tax ratio we utilize adata set of 46 developed and lessdeveloped countries between 1980 and 1997and find a clear confirmationof our hypothesis further a simulationanalysis reveals that the observedchange in economic freedom has equalizedthe international distributionof corporate tax ratios

cross border shopping from small to large countries abstract contrary to predictions of theoretical models there are many examples in the real world of cross border shopping from small to large countries we demonstrate that a sufficient wedge between marginal costs of public funds in small and large countries can explain this phenomenon

the scope for taxation and public expenditure in an open economy in this survey of some central issues of tax and expenditure policy in an open economy we consider the implications for policy of free although not necessarily perfect international mobility of commodities capital and labour we examine the issues both from a positive and a normative point of view trying to identify both the incidence and welfare effects of international mobility one general conclusion is that tax distortions may increase in magnitude in comparison with a closed economy but they may also increase in kind as when otherwise neutral taxes become distortionary because of factor mobility

tax competition tax exporting and higher government choice of tax instruments for local governments abstract this paper presents a theoretical model with tax exporting due to external ownership of a fraction of the land in each local jurisdiction there are n local jurisdictions in a metropolitan area n 1 and many metropolitan areas in a world economy the paper examines the usage of business property taxes and source based wage taxes by local jurisdictions first in the presence of and then in the absence of residence based lump sum taxes and how this depends on and n the paper then examines the choice of a world national or state government as to whether to allow local metropolitan or sub metropolitan governments to use business property taxes wage taxes or both assuming that the local governments choose the actual tax rates

the agent agents problem payment by relative output this paper begins an investigation into the incentive problems at a firm when the effort of the employer and the employees combines to determine final output the major conclusion is that optimal reward functions in this circumstance will in general value the performance of a worker relative to that of his peers the paper thus joins a growing literature associated with the work of lazear and rosen on rank order tournaments

jeux sans frontieres tax competition and tax coordination when countries differ in size closer international integration is putting increasing pressure on existing national tax structures this paper uses a simple two country model to address a range of consequent policy concerns focusing particularly on the role of country size differences in size exacerbate the inefficiency from noncooperative behavior harming both countries the smaller country loses from harmonization to any tax rate between those set in the noncooperative equilibrium but both countries gain from the imposition of a minimum tax anywhere in that range the fully optimal response to freer cross border trade however may be to do nothing jel h20 h77

a note on equilibrium leadership in tax competition models this paper reexamines the work of kempf and rota graziosi j pub econ 94 768 776 2010 which shows that leadership by the small region is the risk dominant equilibrium under the endogenous timing game they obtained this result in a model where the asymmetry among regions translates into different gradients of the demand for capital but identical vertical intercepts in this paper we simply reverse the form of asymmetry by considering different vertical intercepts but identical gradients the reason is that market power is typically related to the intercept and not to the slope of the demand function we then show that leadership by the large region becomes the risk dominant equilibrium and can even become pareto superior

diesel price convergence and mineral oil taxation in europe we empirically analyse convergence of european producer and consumer prices for diesel fuel and investigate the role of excise taxation by comparing the speed of convergence of prices and taxes we find a surprisingly fast speed of convergence for consumer prices while this can in part be explained by fuel tourism the main driving force is producer price dynamics tax convergence contributes weakly to price convergence but the overall effect is to slow down consumer relative to producer price convergence

how integrated are world beef markets the case of australian and u s beef markets abstract the objective of the paper is to examine market integration between australian and u s beef prices at the farmgate level if these two prices are found to be integrated then it can be alleged that australian beef prices can be used as a world price in empirical analyses and or as a reference price to measure the level of support accorded the u s beef sector co integration analysis and a time varying parameter estimation procedure based on the kalman filter model are applied the paper distinguishes between steer and cow beef segments and it uses monthly data over the 1972 1 to 1993 2 period the results indicate that australian and u s beef prices are co integrated albeit not fully and that the degree of convergence between the various price pairs has not substantially increased over time the results also suggest that australian prices can not unequivocally be adopted as a world price in empirical analyses

the incentive effects of tournaments with positive externalities among workers much recent research concerning work incentives has analyzed tournaments or contests between workers for rewards based on a comparison of their relative performance 3 5 8 9 12 bull schotter and weigelt 2 2 argue that tournaments are empirically pervasive characterizing incentives for many salespeople competing for bonuses managers vying for high level positions academics striving for limited tenured positions and politicians whose election hinges on relative votes received contrarily nalebuff and stiglitz 12 40 suggest that tournaments are rare for example many employees face incentives produced by upward sloping age earnings profiles 6 individual piece rates profit sharing or group bonus schemes 14 or potential firing 11 responding to this lack of agreement over the pervasiveness of tournaments recent theoretical research has begun to identify circumstances where tournaments fail or succeed the corpus of such work generalizes the conditions under which tournaments are optimal for example tournaments can respond effectively to common environmental shocks to productivity 5 12 heterogeneous workers 13 employee and employer moral hazard problems 3 monitoring difficulties 9 and inefficiencies associated with firing as an incentive 11 less work has addressed circumstances where tournaments may fail the question which concerns us here to date three circumstances where tournaments fail have been identified first as lazear and rosen noted in their seminal article on tournaments such incentives fail if individual effort can be measured perfectly or precisely inferred from output as they put it a difference of opinion is necessary for a horse race 8 845 if the winner is known before the race only the winner will run and slowly at that second lazear 7 analyzes circumstances where agents can engage in sabotage or increase the probability of winning by reducing their opponent s measured output tournaments then fail because the saboteur can reduce his or her own output while

a three input model of the spatial effects of a central city wage tax abstract this paper considers the short run and long run spatial effects on wages employment and business capital as functions of location of a localized increase in wage tax rates the model is most applicable to a central city that has a higher wage tax rate than the surrounding suburbs the inclusion of land as a third input in production significantly reduces the long run effects of a central city wage tax on employment near the central city boundary as compared with a model in which labor and capital are the only two inputs the short run effects are significantly less than the long run effects

spatial competition between jurisdictions which tax perfectly competitive retail or production centers abstract this paper examines the taxes that jurisdictions choose to impose on perfectly competitive retail centers or production centers within their boundaries retail centers are located on a line and jurisdictions are segments of the line a jurisdiction maximizes the sum of tax revenues and residents consumer surplus the tax chosen by a jurisdiction is a function of the spacing between retail centers the locations of interjurisdictional boundaries and the taxes imposed by neighboring jurisdictions an exporting jurisdiction chooses a positive tax an importing jurisdiction chooses a zero tax even if neighboring jurisdictions have taxes or subsidies if all jurisdictions with retail centers use endogenous fiscal policy then each imposes a positive or zero tax

price dynamics in european petroleum markets this paper analyses horizontal and vertical price dynamics in the eu petroleum markets the results indicate that the cross country price differentials have significant impact on the local price adjustments we investigate the cross national price spill overs and find that the extent of the welfare transfer due to asymmetric price transmission when analysed in a cross country setting is less pronounced than claimed in previous contributions in this area we also find empirical evidence although indirect for the politically charged concept of fuel tourism using a pan european cross product time series dataset