majority voting and corporate control the rule of the dominant shareholder this paper incorporates a model of corporate control into a general equilibrium framework for production economies with incomplete markets the classical objective of value maximization is extended but is indeterminate instead firms are viewed as being subject to shareholder control via some decision mechanism as long as this decision mechanism is responsive to a unanimous preference by shareholders shareholder control is consistent with but stronger than value maximization next the particular institution of majority voting by shareholders is examined it is shown that for generic economies a majority rule equilibrium for a firm implies that production is optimal for the largest or dominant shareholder finally a more realistic control mechanism is considered in which majority voting by shareholders is constrained by a group of shareholders or board of directors who control the voting agenda the result is that shareholders not on the board have no influence on the equilibrium production choice of the firm

on the efficiency of equilibria in a legislative bargaining model with particularistic and collective goods this study analyzes the efficiency of equilibria in a multilateral bargaining game in which a legislature divides its budget among collective and particularistic goods in order to disentangle the causes of inefficiency we extend the model of volden and wiseman am polit sci rev 101 79 92 2007 by considering quasi linear utility functions and consensus requirements ranging from simple majority to unanimity although unanimous agreements can be reached under weaker consensus requirements we show that pareto inefficiency is associated with non unanimous consent we also study how i the endogenous selection of the legislature s size or ii a sequential choice of collective and particularistic spending eliminates or attenuates the inefficiency problem

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

majority rules and incentives a club s majority rule defines the number of members that must approve a policy proposed to replace the status quo since the majority rule thus dictates the extent to which winners must compensate losers it also determines the incentives to invest in order to become a winner of anticipated projects if the required majority is large members invest too little because of a holdup problem if it is small members invest too much in order to become a member of the majority coalition to balance these opposing forces the majority rule should increase in the project s value and the club s enforcement capacity but decrease in the heterogeneity in preferences externalities can be internalized by adjusting the rule with heterogeneity in size or initial conditions votes should be appropriately weighted or double majorities required

bargaining and value we present and analyze a model of noncooperative bargaining among n participants applied to situations describable as games in coalitional form this leads to a unified solution theory for such games that has as special cases the shapley value in the transferable utility tu case the nash bargaining solution in the pure bargaining case and the recently introduced maschler owen consistent value in the general nontransferable utility ntu case moreover we show that any variation in a certain class of our bargaining procedure which generates the shapley value in the tu setup must yield the consistent value in the general ntu setup

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

renegotiation design with unverifiable information this paper considers a buyer seller relationship with observable but unverifiable investments and or random utility parameters in such situations it is known that contract renegotiation may prevent the implementation of first best outcomes in this paper we show however that efficient investments and optimal risk sharing can typically be achieved provided the initial contract is able to monitor the ex post renegotiation process specifically we focus on the following two features of renegotiation design first default options in case renegotiation breaks down second the allocation of all bargaining power to either contracting party moreover we show that these two features can be obtained in standard rubinstein bargaining games through contractual provisions such as specific performance clauses and penalties for delay or equivalently financial hostages refundable without interest

credence attributes voluntary organizations and social pressure abstract credence attributes of products are unobservable through search or experience some consumers are willing to pay a premium for their provision and in addition citizens can apply social pressure on firms to supply credence attributes firms have formed voluntary organizations to assure the provision of credence attributes and the credible provision provides product differentiation this paper provides a theory of the voluntary provision of credence attributes in the presence of demand pull from consumers and social pressure from ngos where an organization chooses a credence standard and firms compete given the standard the credence standard is lower the larger the organization and social pressure results in a higher standard

capital income and profit taxation with foreign ownership of firms abstract this paper establishes optimal rules for capital income and profits taxation in the open economy with or without foreign ownership of domestic firms we show that if there are constraints on the feasibility of profits taxation both saving and investment taxes generally enter the optimal tax package if instead profits can be fully taxed then source based investment taxes vanish if domestic firms are in part owned by foreigners then source based investment taxes can be used to shift income away from these to domestic citizens and they may even be used to finance lump sum transfers to domestic residents

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

interjurisdictional capital mobility fiscal externality and a corrective subsidy abstract recent studies emphasize that local property taxation may result in inefficiently small amounts of local public spending this paper shows that the inefficiency can be traced to a fiscal externality when one jurisdiction increases its taxes it causes a flow of capital to other jurisdictions that increases their tax revenues the inefficiency can be corrected with a subsidy that internalizes the externality key empirical parameters determining the magnitude of the externality are identified illustrative calculations indicate that subsidy rates on the order of 40 might be required to achieve efficiency

the fear of exclusion individual effort when group formation is endogenous to secure their membership in a popular group individuals may contribute more to the group s local public good than they would if group formation were exogenous those in the most unpopular group do not have this incentive to contribute this may result in substantial differences in individual effort level between groups our model thus provides one explanation for the existence of group specific behavioral norms a principal will prefer exogenous or endogenous group formation depending on whether he prefers high or low levels of the local public good we analyze two stylized examples social interaction in schools and multiple task teamwork

effective tax rates in macroeconomics cross country estimates of tax rates on factor incomes and consumption abstract this paper proposes a method for computing tax rates using national accounts and revenue statistics using this method we construct time series of tax rates for large industrial countries the method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases this method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework these tax rates compare favorably with existing estimates of marginal tax rates and highlight important international differences in tax policy

regional tax coordination and foreign direct investment this paper analyses the effects of a regionally coordinated profit tax or location subsidy in a model with three active countries one of which is not part of the union and a globally mobile firm we show that regional coordination can lead to two types of welfare gain first for investments that would take place in the union in the absence of coordination a coordinated tax increase can transfer location rents from the firm to the union second by internalising all of the union s benefits from foreign direct investment a coordinated tax reduction can attract more welfare enhancing investment than when member states act in isolation depending on which motive dominates tax levels may thus rise or fall under regional coordination

specific investments and the eu enlargement abstract this paper analyzes a hold up problem in the eu enlargement process eu specific anticipatory investments of private firms lower the government s outside option the eu takes advantage of the applicants increased dependency and extracts more surplus through entrance conditions that benefit it and impose net costs on applicants if private firms pay less than the full entrance fee in taxes enlargement immiserizes the entrant while in practice an applicant may possess sufficient bargaining power to avoid immiserization the hold up problem reduces its potential gains from joining the eu this result suggests that previous calculations ignoring both the applicants costs of joining the eu and the dynamics of their bargaining position during the negotiations overestimate the welfare effects of membership

the economics of split ticket voting in representative democracies in u s elections voters often vote for candidates from different parties for president and congress voters also express dissatisfaction with the performance of congress as a whole and satisfaction with their own representative the authors develop a model of split ticket voting in which government spending is financed by uniform taxes the benefits from this spending are concentrated while the model generates split ticket voting overall spending is too high only if the president s powers are limited overall spending is too high in a parliamentary system the authors model can be used as the basis of an argument for term limits copyright 1997 by american economic association

choosing how to choose self stable majority rules and constitutions constitutional arrangements affect the decisions made by a society we study how this effect leads to preferences of citizens over constitutions and ultimately how this has a feedback that determines which constitutions can survive in a given society constitutions are stylized here to consist of a voting rule for ordinary business and possibly a different voting rule for making changes to the constitution we define an equilibrium notion for constitutions called self stability whereby under the rules of a self stable constitution the society would not vote to change the constitution we argue that only self stable constitutions will endure we prove that self stable constitutions always exist but that most constitutions even very prominent ones may not be self stable for some societies we show that constitutions where the voting rule used to amend the constitution is the same as the voting rule used for ordinary business are dangerously simplistic and there are many societies for which no such constitution is self stable we conclude with a characterization of the set of self stable constitutions that use majority rule for ordinary business

tax competition and leviathan abstract attitudes towards downward pressure on tax rates from international tax competition depend on attitudes towards government this paper synthesises the two extremes which as in other areas of public finance have dominated the debate typically being presented as stark alternatives the view of government as a leviathan from which tax competition emerges as a useful constraint on policy makers and the view of government as a benevolent maximiser of their citizens welfare from which it emerges as a source of inefficiency conditions are derived under which when policy makers are neither entirely benevolent nor wholly self serving tax coordination benefits the representative citizen

self enforcing voting in international organizations some international organizations are governed by unanimity rule some others by a majority system still others have moved from one system to the other over time the existing voting models have a difficult time explaining the observed variation in governance mode and in particular the widespread occurrence of the unanimity system we present a model whose main departure from standard voting models is that there is no external enforcement mechanism each country is sovereign and cannot be forced to follow the collective decision or in other words the voting system must be self enforcing the model yields unanimity as the optimal system for a wide range of parameters and delivers rich predictions on the variation in the mode of governance both across organizations and over time we thank james anderson matt jackson francois maniquet guido tabellini and jean tirole for very helpful comments arnaud costinot provided excellent research assistance we also bene

legislative bargaining under weighted voting organizations often distribute resources through weighted voting we analyze this setting using a non cooperative bargaining game based on the baron ferejohn 1989 model unlike analyses derived from cooperative game theory we find that each voter s expected payoff is proportional to her voting weight an exception occurs when many high weight voters exist as low weight voters may expect disproportionately high payoffs due to proposal power the model also predicts that ex post the coalition formateur the party chosen to form a coalition will receive a disproportionately high payoff using data from coalition governments from 1946 to 2001 we find strong evidence ofsuch formateur effects

dynamic pivotal politics we analyze a dynamic extension of a parsimonious model of lawmaking in which preferences evolve over time and today s policy becomes tomorrow s status quo unlike in existing models of pivotal politics policy makers voting behavior depends on the institutional environment and on their expectations about future economic and political shocks relative to sincere voting the equilibrium behavior exhibits a strategic polarization effect which increases with the degree of consensus required by the institution the volatility of the policy environment and the expected ideological polarization of the future policy makers the equilibrium behavior also exhibits a strategic policy bias which works against any exogenous policy bias embedded in the voting rule our analysis implies that the existing literature underestimates the inertial effect of checks and balances and overestimates the impact of institutional biases such as fiscally conservative budget procedures

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

incomplete social contracts there is a long normative social contract tradition that attempts to characterize ex post income inequalities that are agreeable to all behind a veil of ignorance this paper takes a similar normative approach to characterize social decision making procedures it is shown that quite generally some form of majority voting is preferred to unanimity behind a veil of ignorance whenever society faces deadweight costs in making compensating transfers deviations from unanimity or ex post pareto optimality are ex ante efficient to the extent that they economize on costly compensating transfers put another way the optimal decision rule trades off the benefits of minority protection and those from greater flexibility jel h11 g33 g34 d63 p16 p48

flexible integration mandatory and minimum participation rules should a subset of the eu members be allowed to form inner clubs and enhance cooperation or should integration proceed at the same speed for all while flexible cooperation allows members to participate if and only if they benefit it also generates a free rider problem if potential members choose to opt out the analysis shows that flexible cooperation is better only if the heterogeneity is large and the externality small but rigid cooperation will be the political equilibrium too often flexibility and rigidity can be combined by i mandatory participation rules where participation is voluntary unless a super majority requires everyone to participate and ii minimum participation rules where inner clubs must be sufficiently large the combination of mandatory and minimum participation rules may implement the best possible mechanism

on the weights of nations assigning voting weights in a heterogeneous union we study indirect democracy in which countries states or districts each elect a representative who later votes at a union level on their behalf we show that the voting rule that maximizes the total expected utility of all agents in the union involves assigning a weight to each district s vote and then sticking with the status quo unless at least a threshold of weighted votes is cast for change we analyze how the weights relate to the population size of a country and the correlation structure of agents preferences and then we compare the voting weights in the council of the european union under the nice treaty and the recently proposed constitution

asymmetric tax competition abstract the paper analyzes nash equilibrium when two jurisdictions set tax rates on a tax base which is mobile between them population differences imply tax differences the smaller jurisdiction levies a lower tax rate in equilibrium and its residents are better off than those in the larger jurisdiction the nash equilibrium is inefficient if the two jurisdictions merged the resulting allocation would be efficient however if differences in population are great enough residents of the small jurisdiction would be made worse off by such a merger

climate contracts a game of emissions investments negotiations and renegotiations the paper presents a dynamic game where players can contribute to a public bad invest in technologies and write incomplete contracts despite the n 1 stocks in the model the analysis is tractable and the symmetric markov perfect equilibrium unique the framework helps to analyze emissions investments and international environmental agreements if only the emission levels are contractible then investments are suboptimally small if the contract is short term or close to its expiration date to encourage investments the optimal contract is more ambitious if it is short term and it is tougher to satisfy close to its expiration date and for countries with small investment costs if renegotiation is possible such an incomplete contract implements the rst best the results have important lessons for how to design a climate treaty

committee design with endogenous information this paper is concerned with the arrangements for collective decision making in a world where agents must be motivated to acquire information the analysis identifies some basic forces shaping the design of panels of decision makers referees managers jurors etc in situations where decision makers are useful only in so far as they expend some effort to gain information about the alternatives at hand these situations are common one being the refereeing process where an editor requires the opinions of a number of experts who must read the paper acquire information in order to give an opinion as to publication analogously in committees which screen applicants to a programme the committee members must gain information about the applicant s qualifications and likelihood of success in order to evaluate whether to admit him her finally in trial juries it is important that jurors pay attention to the evidence in order to make an informed judgement 1 we focus on environments where information is a public good in the sense that the social benefits of one decision maker acquiring information exceed the private benefits a good mechanism in this environment must not only aggregate information efficiently but also induce the decision makers to acquire information we analyse the design of voting mechanisms our problem is to choose two parameters which determine both the incentive to acquire information and the efficiency with which information is aggregated the first parameter is the size of the decision making unit the number of committee members the second is the plurality required to overturn the status quo the voting rule our main result is this a voting rule that requires a large plurality in the extreme unanimity to upset the status quo can be optimal only if the information available to each committee member is sufficiently accurate when individual information is noisy the drawback

the case for international tax co ordination reconsidered tax co ordination its desirability and redistributional implication in a world of high capital mobility governments may be tempted to undercut each other s capital income taxes to attract capital from abroad since such tax competition may have detrimental effects for all countries european policy makers have debated the introduction of a minimum capital income tax rate within the eu this paper develops an applied general equilibrium model to estimate the effects of such tax co ordination on resource allocation income distribution and social welfare the model allows for the concern of policy makers that a rise in capital taxes within the eu may cause a capital flight out of europe capital flight will indeed reduce the welfare gain from tax co ordination within western europe but a positive net gain will remain although it is likely to be well below 1 of gdp the gain from co ordination will be unevenly distributed across european countries due to differences in economic structures and in the social preference for redistribution moreover even if the median voter s gain from tax co ordination may be small the gains for the poorer sections of society may be quite large peter birch sorensen

oversight of long term investment by short lived regulators certain regulators of economic activity like utility regulators and government procurement officers typically serve for relatively short periods of time the authors consider how to best motivate long term investment in the presence of short lived regulators a firm s investment decision is overseen by one regulator whether the investment is ultimately adopted is determined by a second distinct regulator each regulator is concerned with the welfare of its own contemporary population transfer payments between populations are limited and relevant data cannot be verified by third parties underadoption and underinvestment on average result although overinvestment may also occur under the optimal regulatory charter copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

pigou tiebout property taxation and the underprovision of local public goods abstract pigou s proposition that the use of distorting taxes rather than neutral head taxes reduces public service levels is examined in this paper a simple model with a national system of competing local governments is utilized to demonstrate that the use of a distorting property tax on mobile capital decreases the level of residential public services the case where public services are an intermediate producer good is also considered

ideology tactics and efficiency in redistributive politics we model the electoral politics of redistribution when voters and parties care about inequality in addition to their private concerns for consumption and votes respectively ideological concerns about income redistribution lead each party to adopt a general proportional income tax adjusted to appeal to the ideological leanings of high clout groups with disproportionately many swing voters which the parties also ply with pork barrel projects our results relate to director s law which says that redistributive politics favors middle classes at the expense of both rich and poor

tax competition with imperfectly mobile capital abstract this paper considers interjurisdictional tax competition in a two period model with imperfectly mobile capital in the first period capital is perfectly mobile in the second period however capital cannot move perfectly because of transactions costs once employed in a jurisdiction in the first period this imperfect mobility of capital may lead to the overprovision rather than the underprovision of public goods in the second period and may make jurisdictions compete more aggressively for capital in the first period

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

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

legislative bargaining with reconsideration we present a dynamic model of legislative bargaining with an endogenously evolving default policy and a persistent agenda setter policy making proceeds until the agenda setter can no longer pass a new policy to replace an approved bill we prove existence and necessary conditions of pure strategy stationary equilibria for any finite policy space any number of players and any preference profile in equilibrium the value of proposal power is limited compared to the case that disallows reconsideration as voters are induced to protect each other s benefits to maintain their future bargaining positions the agenda setter in turn would prefer to limit his ability to reconsider the lack of commitment due to the possibility of reconsideration however enhances policy efficiency

centralized fiscal spending by supranational unions we study fiscal spending by supranational unions where participation is voluntary and countries bargain over contributions to and the allocation of a central budget since decisions are made by unanimity bargaining power over the allocation becomes a function of contributions which generically causes inefficiency in the presence of income asymmetry between member nations this link between the budget allocation and contributions explains patterns of inefficient spending in the eu e g why resources are diverted to low productivity projects in high income countries the option of veto creates a trade off between efficiency on the contributions margin and efficiency on the allocation margin

harmonization and side payments in political cooperation for two districts or countries that try to internalize externalities i analyze a bargaining game under private information i derive conditions for when it is efficient with uniform policies across regions with and without side payments and when it is efficient to prohibit side payments in the negotiations while policy differentiation and side payments allow the policy to better reflect local conditions they create conflicts between the regions and thus delay the results also describe when political centralization outperforms decentralized cooperation and they provide a theoretical foundation for the controversial uniformity assumption traditionally used by the fiscal federalism literature

strategic delegation and voting rules abstract the selection of political representatives depends on the political system principals such as voters or districts may benefit by strategically electing representatives different from themselves while a status quo biased delegate may be a better negotiator an enthusiastic representative has a better chance of being included in the majority coalition a larger majority requirement leads to conservative delegation and hence a status quo bias a poor minority protection does the opposite through strategic delegation the political system also determines whether centralization or decentralization is beneficial

international tax competition and gains from tax harmonization abstract in a world economy there are two types of distortions which can be caused by capital income taxation in addition to the standard closed economy wedge between the consumer saver marginal intertemporal rate of substitution and the producer investor marginal productivity of capital i international differences in intertemporal marginal rates of substitution implying an inefficient allocation of world savings across countries and ii international differences in the marginal productivity of capital implying an inefficient allocation of world investment across countries the paper focuses on the structure of taxation for countries which are engaged in tax competition and on potential gains from a tax harmonization we show that if the competing countries are sufficiently coordinated with the rest of the world then tax competition leads each country to apply the residence principle of taxation and there are no gains from tax harmonization if however there is not sufficient coordination then tax competition leads to low capital income taxes and the tax burden falls on the internationally immobile factors the outcome is nevertheless still efficient relative to the available constrained set of tax instruments

a noncooperative theory of legislative coalitions this noncooperative theory is based on a model that incorporates an institutional structure that reflects the sequential process of agenda formation and voting in a legislature that has the task of allocating particularistic benefits among legislative districts the theory is intended to identify the incentives for the formation of proposal coordinating coalitions as a function of characteristics of the political system and the rules that govern agenda formation coalition proposals allocate all the benefits to their districts and whenever the coalition has discipline or controls the chair it will be of minimal winning size when proposals are governed by a closed rule when coalition discipline is absent and the chair is neutral the coalition will be comprised of approximately 70 of the legislature a legislative rule that allows amendments may result in larger coalitions coalition composition is also considered

taxation of investment and savings in a world economy the equilibrium of capital and equilibrium market prices are derived for a world economy with a unified securities market mobile capital no uncertainty and varying tax rates on different sources of income in each country the paper then characterizes optimal tax rates for a small country in this setting focusing on the peculiar incentives created when the before tax rate of return differs among securities due to differences in their typical tax treatment copyright 1986 by american economic association

national tax systems versus the european capital market capital taxation alberto giovannini the current structure of taxes on capital income across ec countries can be exploited by corporations to reduce tax burdens skilled individuals can indulge in tax avoidance too the liberalization of capital movements stands to turn tax avoidance into a cottage industry this article provides a primer on capital income taxes and describes strategies which reduce the tax burden from a policy perspective the question is how to avoid massive tax evasion after 1992 there is no need to harmonize if the right taxation principle is adopted two principles are contrasted the territorial principle according to which taxes are levied on domestic investment irrespective of the country of residence of the beneficiary and the worldwide principle according to which taxes are levied on domestic savings irrespective of where they are invested it is shown that the worldwide principle involves much fewer distortions than the territorial principle a strict application of this principle would effectively solve the problem of tat evasion in europe without requiring full harmonization of the tax systems its full implementation would require the abolition of withholding taxes the elimination of tax deferrals which are quite pervasive throughout europe and an in depth review of blocking and secrecy laws

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

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

a coalition formation approach to equilibrium federations the authors develop a model in which states may choose to form coalitions to capture efficiency gains from policy coordination joining a coalition entails setting the policy variable to maximize the coalition s aggregate payoff at a nash equilibrium against nonmembers and to commit to a transfer scheme to share the gains with two states the unique equilibrium structure is complete federation with more than two states incomplete federation can be the unique equilibrium interpreting this result in terms of custom unions the trend to trading bloc formation may be equilibrium behavior even with cooperation and transfers within customs unions copyright 1997 by american economic association

fiscal competition and the pattern of public spending much attention has been given to the impact of fiscal competition on the level of public expenditure but relatively little to the impact on its composition using a broadly familiar and reasonably rich model of fiscal competition in the presence of mobile capital this paper establishes a systematic bias in public spending patterns starting from the non cooperative equilibrium and holding tax rates constant welfare would be improved by a coordinated reduction in the provision of local public inputs and a corresponding increase in the public provision of local public goods benefiting immobile consumers c 1997 elsevier science s a