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Cover of: Endogenous Timing in Tax and Public-Investment Competition
Hikaru Ogawa, Keisuke Kawachi, Taiki Susa

Endogenous Timing in Tax and Public-Investment Competition

Section: Articles
Volume 171 (2015) / Issue 4, pp. 641-651 (11)
Published 09.07.2018
DOI 10.1628/093245615X14307274621224
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  • 10.1628/093245615X14307274621224
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Summary
This study analyzes an endogenous order of moves in an interregional competition for mobile capital, where countries choose their tax or subsidy rate and public-investment levels. In equilibrium, countries set tax or subsidy rates simultaneously, but choose their public-investment levels sequentially. In addition, on comparing the welfare between the simultaneous-move and sequential-move outcomes, we find that (i) the sequential-move welfare levels are always larger, and (ii) the regional disparity in the sequential-move outcome is larger (smaller) than that in the simultaneous-move outcome if the capital-exporting (-importing) country leads in public investment. (JEL: H73, H77)