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Strategic fiscal interaction among OECD countries

This paper investigates whether OECD countries compete with each other for mobile factors by using various fiscal (tax-spending) policy instruments. We use a panel dataset of 20 OECD countries over the 1982-2000 period. There is evidence that international capital inflows (FDI) are affected by fiscal policy at home and abroad. Also, there is evidence of fiscal competition for mobile factors which takes place via capital tax rates. More precisely, we find that domestic capital tax rates react: (i) positively to changes in capital tax rates and (ii) negatively to changes in public investment spending in neighbouring countries. In contrast, evidence of such a strategic interdependence over public investment spending decisions is not established.
Year of publication:
2009-11-08
Authors: Kammas, Pantelis
Institutions: Economics and Econometrics Research Institute (EERI)
Subject: Capital mobility | tax competition | welfare
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application/pdf
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Type of publication: Book / Working Paper
Language: English
Notes:
Number EERI_RP_2009_11 31 pages
Classification: F02 - International Economic Order; Economic Integration and Globalization: General ; H2 - Taxation, Subsidies, and Revenue ; H4 - Publicly Provided Goods
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