[en] In this paper, we argue that static models provide an incomplete analysis of interjurisdictional tax competition. Accordingly, one can doubt whether a one-shot view is suitable for analyzing real world tax competition.
Contrary to previous contributions in tax competition, we are able to model the interplay between changing tax rates and sluggish factor adjustments. We demonstrate that the intensity of tax competition is impacted by the temporal nature of the game. The commitment of governments to stick to their tax policies for a given period (open-loop behavior) leads to less intense competition relative to a static approach. If the policymakers continuously update their tax rates (Markovian
behavior), competition is fiercer than in a static game, except for the case where capital adjustment is relatively sluggish and the governments' marginal valuation of public goods is high enough.
Disciplines :
Méthodes quantitatives en économie & gestion
Auteur, co-auteur :
PAULUS, Nora ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Finance (DF)
PIERETTI, Patrice ; University of Luxembourg > Faculty of Law, Economics and Finance > Department of Economics and Management
ZOU, Benteng ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Economics and Management (DEM)
Co-auteurs externes :
no
Langue du document :
Anglais
Titre :
Is a dynamic approach to tax games relevant?
Date de publication/diffusion :
décembre 2021
Titre du périodique :
Annals of Economics and Statistics
ISSN :
1968-3863
eISSN :
2115-4430
Maison d'édition :
Institut National de la Statistique et des Etudes Economiques (ADRES), Paris, France
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