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Competition in unit vs. ad valorem taxes

By Ben Lockwood


This note shows that in the Sodrow-Miesowski-Wilson model, the Nash equilibrium in capital taxes depends on whether these taxes are unit (as assumed in the literature) or ad valorem (as in reality). In a symmetric version of the model with cobb-Douglas technology, public good provision is higher, and residents in both countries are better off, when countries compete in unit taxes

Topics: HJ
Publisher: University of Warwick. Centre for the Study of Globalisation and Regionalisation
Year: 2001
OAI identifier:

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