Progressive and Regressive Equilibria in a Tax Competition Game
Keyword(s):
This article models interjurisdictional competition over nonlinear taxes on the incomes of mobile individuals. Each individual has exogenous wealth and a location preference that is drawn from a continuous distribution. We find that more concave utility of consumption functions lead to more progressive tax structures, as richer people place less value on marginal consumption relative to location. In the benchmark model, a relative risk aversion coefficient of one is the boundary between progressivity and regressivity. The exercise helps us to understand which types of jurisdictions are more likely to have progressive taxes as their optimal policies.
2008 ◽
Vol 11
(07)
◽
pp. 705-716
Keyword(s):
Keyword(s):