Tax competition as a cause of falling corporate income taxes. A literature survey.

Tax rates on capital income, corporate income tax rates in particular, have been declining in most industrialized countries since the mid 1980ies. Among the explanations for this development tax competition between countries for mobile capital has been mentioned frequently. A vast empirical literature dealing with tax competition for mobile capital has emerged. This paper gives a comprehensive overview of these empirical studies. A particular focus is put on studies modelling strategic interaction in tax policies of competing jurisdictions - which is at the heart of the competition concept. The paper also addresses the issue whether existing studies convincingly isolate tax competition as a driver of falling capital / corporate income tax rates. Given the empirical evidence surveyed it appears that tax rates indeed fall due to tax competition, in particular due to competition for new firms and for paper profits. However, closer look at the empirical approaches applied in the papers surveyed suggests that fully convincing evidence establishing tax competition as driver of falling tax rates is still lacking.Series: Discussion Papers SFB International Tax Coordinatio

Comparative Statics for Market Games: The Strong Concavity Case

In this paper we study the effects of a change in sorne exogenous variable (the number of players or a parameter in the payoff functions) on the strategies played and payoffs obtained in a Nash Equilibrium in the framework of a Market Game (a generalization of the Cournot model)o We assume a strong concavity condition which implies that the best reply function of any player is decreasing on sum of the strategies of the remaining players (Le. strategic substitution). Our results generalize and unify those known in the Cournot model

Environmental taxation and labour-market distortions

Taxation;Pollution Control

On time-inconsistency and pollution control: A macroeconomic approach

Fiscal Policy;Pollution Control;environmental economics

Secret information acquisition in cournot markets.

Two-stage game models of information aequisition in stochastie oligopolies require the unrealistic assumption that firms observe the preeision of information ehosen by their eompetitors before determining quantities. This paper analyzes seeret information aequisition as a one-stage game. relative to the two-stage game firms are shown to acquire les information. Policy implications based on the two-stage game yield, therefore, too high taxes or too low subsidies for research aetivities. For the case of heterogeneous duopoly it is shown that comparative statics results partly depend on the observability assumption.Information acquisition; Oligopoly; uncertainty; Bayesian equilibrium;

Optimal dynamic taxation, saving and investment

Fiscal Policy;Optimization;public economics

Protectionists, environmentalists, and the formation of environmental policy in an open economy

In situations where the traditional instruments of trade policy are not available, protection for import-competing industries can be given only indirectly. One of the candidates of giving indirect subsidies is environmental regulation. The competitiveness of a domestic industry can be improved by low emission taxes, by low environmental taxes on the consumption of the industry's output, or by low quality standards that have to be met by the goods that are produced by this industry. The paper looks at these instruments in a partial-equilibrium setting. There are a domestic and a foreign industry that produce goods that are regarded as imperfect substitutes by the consumers. Firms are price takers. The government has five policy instruments at its disposal: the emission tax rate, taxes on the consumption of domestic and foreign goods, and environmental-quality standards for domestic and foreign goods. In a first step, the small-country case is addressed. Two lobby groups that are interested in influencing environmental policies are considered: the owners of an industry-specific factor and environmentalists. The process of regulatory capture is modelled via a poMcal-supportfunctLon approach. Two cases are distinguished. First, the lobbies capture only single policy instruments. Second, they capture environmental policy as a whole. It is seen that some counter-intuitive results turn up, and this is explained by the fact that lobbies and policy makers are interested in providing protection in the most efficient way. Then we look at the largecountry case where environmental policies affect the terms of trade. It is seen that regulatory capture may lead to welfare gains since lobbies sometimes happen to internalise part of the external effects arising in the international policy game.

Competitor-oriented Objectives: The Myth of Market Share

Competitor-oriented objectives, such as market-share targets, are promoted by academics and are commonly used by firms. A 1996 review of the evidence, summarized in this paper, indicated that competitor-oriented objectives reduce profitability. However, we found that this evidence has been ignored by managers. We then describe evidence from 12 new studies, one of which is introduced in this paper. This evidence supports the conclusion that competitor-oriented objectives are harmful, especially when managers receive information about market shares of competitors. Unfortunately, we expect that many firms will continue to use competitor-oriented objectives to the detriment of their profitability