Fiscal Interactions Among European Countries: Does the EU Matter?

By Michela Redoano. Social Science Research Network, 2007

141 citations recorded by the source corpus.

This paper provides a simple theoretical model of capital tax competition between countries that differ in spatial location, and where cross-border investment costs are proportional to distance (a gravity model). We model EU membership as a reduction in ‘distance’ between countries. Precise predictions about reaction functions’ intercepts and slopes are derived. In particular we find that joining the Union lowers tax reaction function’s intercept and that all countries react more to member countries than they do to non-members. These predictions are largely confirmed using a panel data set of statutory corporate tax rates on Western European countries

Subfields: Accounting, Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/58162c559f288ba15d7f2249c0979342e7da0344

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Citations in the corpus

Yardstick competition in a Federation: Theory and Evidence from China (2012, methodology): “…interactions and their strategic complementarity relates to the United States (Case, Rosen, and Hines (1993), Figlio, Kolpin, and Reid (1999)), European counties (Redoano (2007)), Indonesia (Arze, Martinez-Vasquez, and Puwanti (2008)) or French municipalities (Foucault, Madies, and Paty (2008)).”
Public spending interactions and local politics. Empirical evidence from French municipalities (2008, methodology): “…estimators are likely to be inconsistent when including the time-lagged dependent variable in the regression (Devereux et al. 2002; Dreher 2006; Redoano 2007), the GMM estimator developed by Arellano and Bond (1991) in addition to the IV estimator of the spatial coefficient (ρ) is more…”
Strategic interaction in local governments’ industrial land supply: Evidence from China (2017, methodology): “Second, when the dependent variable is persistent, a dynamic spatial panel data model using the GMM method should be introduced as the previous estimators are inconsistent (Costa et al., 2015; Radoano, 2007).”
What Drives Corporate Tax Rates Down? A Reassessment of Globalization, Tax Competition, and Dynamic Adjustment to Shocks (2011, unknown): “Previous studies of international tax competition have extensively employed uniform weights, which put equal weight on each foreign country in computing the average tax rate of other countries (Devereux et al., 2008; Redoano, 2007).”
WHAT DO WE KNOW ABOUT CORPORATE TAX COMPETITION? (2013, background): “Starting with Redoano (2007) investigating the European Union itself as the driving force of corporate tax competition the focus shifted increasing to the low tax Eastern European countries.”