Sensitivity versus size: Implications for tax competition

• 成果类型: Article
• 署名作者: Agrawal, David R.; Bagh, Adib; Mardan, Mohammed
• 署名单位: University of Kentucky; Norwegian School of Economics (NHH)
• 刊物名称: THEORETICAL ECONOMICS
• ISSN/ISSBN: 1933-6837
• DOI: 10.3982/TE5338
• 发表日期: 2025-07-01
• 页码: 1007-1041
• 关键词: Ramsey rule; inverse elasticity; fiscal competition; optimal taxation; spatial price competition; sales tax; c7; D4; H2; H7; L1; R5

摘要

The conventional wisdom is that a large jurisdiction sets a higher tax rate than a small jurisdiction. We show that this result arises due to simplifying assumptions that imply that tax-base sensitivities are equal across jurisdictions. When more than two jurisdictions compete in commodity taxes, tax-base sensitivities need not be equal across jurisdictions and a small jurisdiction can set a higher tax rate than a large jurisdiction. Our analysis extends to capital and profit taxes, and, more generally, to various types of multi-player asymmetric competition.