IGIDR Working Paper: Political Competition and Leadership in Tax Competition  



Author:Rupayan Pal and Ajay Sharma

Title:Political Competition and Leadership in Tax Competition


In this paper, we introduce political competition in a sequential move tax competition game between two regions for foreign owned mobile capital. It shows that in case of sequential move, political delegation takes place only in the follower region, not in the leader region. Moreover, political competition need not necessarily lead to higher tax rate in equilibrium. These results are in the sharp contrast to the existing results.

Key words:Mobile capital, Tax competition, Political competition, Leadership, Public good.

JEL Code(s):F21, H25, D70, H42, D40, R50

Weblink: http://www.igidr.ac.in/pdf/publication/WP-2011-024.pdf