| Reference : Asymmetric Competition among Nation States: A Differential Game Approach |
| Scientific journals : Article | |||
| Business & economic sciences : Economic systems & public economics | |||
| http://hdl.handle.net/10993/17645 | |||
| Asymmetric Competition among Nation States: A Differential Game Approach | |
| English | |
Han, Yutao  [] | |
| Pieretti, Patrice [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >] | |
| Zanaj, Skerdilajda [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >] | |
| Zou, Benteng [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >] | |
| 2014 | |
| Journal of Public Economics | |
| Elsevier Science | |
| Yes (verified by ORBilu) | |
| 0047-2727 | |
| Lausanne | |
| Switzerland | |
| [en] Tax/public input competition ; Open-loop/Markovian strategies ; Differential games. | |
| [en] This paper analyzes the impact of foreign investments on a small country’s economy
in the context of international competition. To that end, we model tax and public input competition within a differential game framework between two unequally sized countries. The model accounts for the widely recognized characteristic that small states are more flexible in their political decision-making than larger countries. However, we also acknowledge that small size is associated with limited institutional capacity in the provision of public services. The model shows that the long-term outcome of international competition crucially depends on the degree of capital mobility. In particular, we show that flexibility mitigates against - but does not eliminate - the likelihood of collapse in a small economy. Finally, we note that the beneficial effect of flexibility in a small state increases with its inefficiency in providing public services and with the degree of international openness. | |
| http://hdl.handle.net/10993/17645 |
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