technical report

DP/WP

Text

Discussion Papers In Economics And Business. 2016, 16-27, p. 1-22

The Direction of Strategic Delegation and Voter Welfare in Asymmetric Tax Competition Models

Graduate School of Economics and Osaka School of International Public Policy (OSIPP), Osaka University

English

Text

2016-11

http://www2.econ.osaka-u.ac.jp/library/global/dp/1627.pdf

This paper examined a political process and economic consequences of tax competition among asymmetric countries. Citizens are endowed with heterogeneous capital incomes. The median-voters deliberately elect a delegate whose preferences differ from their own, to pursue advantages in the international tax competition. When the countries have different productivity of the capital, the country with a low capital productivity may delegate the tax authority to a citizen who is richer than the median-voter. As a result, the outcome through strategic delegation may make the median-voters and the majority of citizens worse-off than the selfrepresentation outcome, contrary to the previous studies with symmetric countries.Similar results are obtained when the countries differ in capital endowments. In contrast, when the countries differ in population size, productive inefficiency is reduced, and the median-voters are better-off through strategic delegation. We also point out that the role of campaign promises is important for the equilibrium tax rates and citizens’welfare.

57927

The Direction of Strategic Delegation and Voter Welfare in Asymmetric Tax Competition Models

Graduate School of Economics and Osaka School of International Public Policy (OSIPP), Osaka University

English

2016-11

Discussion Papers In Economics And Business

16-27

1

22

https://hdl.handle.net/11094/57927

http://www2.econ.osaka-u.ac.jp/library/global/dp/1627.pdf