@techreport{89ab2a7d0d9a47e5b85e2e3004021e0b,
title = "Globalization, Tax Competition and Fiscal Equalization",
abstract = "Recent empirical evidences suggest that the economic globalization has likely favored the emergence of harmful tax competition among major industrialized countries. This paper analyzes the ability of {\"O}scal equalization to weaken the international tax competition when the economies are not perfectly integrated and the private sector is imperfectly competitive. We consider two types of transfer programs: tax base and tax revenue equalization. The framework developed yields results which agree with empirical evidences and exhibits two types of inefficiencies due to noncooperative behavior: the tax rates are too low in both regions and the difference in tax rates can be too high. Both externalities imply that the provision of public good is too low from an efficiency viewpoint. We show that {\"O}scal equalization may imply more efficient tax policies and tax base allocation between regions, promoting a rise in corporate tax revenues.",
keywords = "profit tax competition, economic integration, monopolistic competition, fiscal equalization",
author = "Carl Gaign{\'e} and St{\'e}phane Riou",
year = "2004",
month = nov,
day = "22",
language = "English",
series = "Strathclyde Discussion Papers in Economics",
publisher = "University of Strathclyde",
type = "WorkingPaper",
institution = "University of Strathclyde",
}