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- Title
Tax competition and political agency problems.
- Authors
Kasamatsu, Satoshi; Kishishita, Daiki
- Abstract
We study how politicians' reputation concerns affect taxation in the presence of intergovernmental competition. To this end, we construct a two‐country asymmetric tax competition model in which the residents in one of the two countries face a domestic political agency problem: the residents do not know whether the incumbent politician is benevolent or leviathan. To separate themselves from leviathan politicians and attract voters' support, benevolent politicians argue for excessively low taxation, which can be regarded as anti‐taxation populism. This anti‐taxation populism exhibits the following two properties. First, the populist country's low production technology relative to the other country facilitates the emergence of anti‐taxation populism. Second, anti‐taxation populism can improve welfare in terms of either the populist country or the whole world, depending on the asymmetry of the production technology.
- Subjects
POLITICAL competition; AGENT (Philosophy); TAXATION
- Publication
Canadian Journal of Economics, 2021, Vol 54, Issue 4, p1782
- ISSN
0008-4085
- Publication type
Article
- DOI
10.1111/caje.12569