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Journal of Economic Integration 2017 December;32(4) :842-872.
DOI: https://doi.org/10.11130/jei.2017.32.4.842
International Tax Competition in the Global Economy
Boris Korneychuk 
National Research University Higher School of Economics, Saint-Petersburg, Russia
Corresponding Author: Boris Korneychuk ,Tel: +7 9214058701, Fax: 812 7143023, Email: bkorneychuk@hse.ru
Copyright ©2017 Journal of Economic Integration
ABSTRACT
This study employs a Keynesian-type model of the global economy to investigate the impact of savings rate, openness, and population size on equilibrium tax rates and tax revenues in a world economy. Within the model, the marginal propensity to consume is represented by a matrix specifying each country’s income distribution among internal consumption, exports, and savings. This study reveals that equilibrium tax rates are higher in countries with a higher rate of savings, greater level of openness, and smaller population size. If an infinitely large number of identical and highly integrated competing countries exist, then a system with indirect taxation has a lower equilibrium tax rate and higher tax revenues than a system with direct taxation. If a country with direct taxation and a country with indirect taxation compete, then the latter country has an advantage.

JEL Classification
E12: Keynes; Keynesian; Post Keynesian
F15: Economic Integration
F41: Open Economy Macroeconomics
H21: Efficiency; Optimal Taxation
H87: International Fiscal Issues; International Public Goods
Keywords: Tax Competition | Global Economy | Keynesian Model | Tax Policy
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