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Dictators Don’t Compete: Autocracy, Democracy, and Tax Competition. CES Open Forum Series #22 2018-2019

Genschel, Philipp and Lierse, Hanna and Seelkopf, Laura (2019) Dictators Don’t Compete: Autocracy, Democracy, and Tax Competition. CES Open Forum Series #22 2018-2019. [Working Paper]

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    Abstract

    It pays to be a tax haven. Ireland has become rich that way. Why do not all countries follow the Irish example, cut their capital taxes and get wealthy? One reason is structural. As the economic standard model of tax competition explains, small countries gain from competitive tax cuts while large countries suffer. Yet not all small (large) countries have low (high) capital taxes. Why? The reason, we argue, is political. While the economic standard model implicitly assumes competing governments to be democratic, more than a third of countries world-wide are non-democratic. We explain theoretically why autocracies are less likely to adjust to competitive constraints and test our argument empirically against data on the corporate tax policy of 99 countries from 1999 to 2011. Our findings shed light on how domestic institutions and global markets interact in economic policy making.

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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > tax policy
    Countries > Ireland
    EU policies and themes > Policies & related activities > political affairs > democracy/democratic deficit
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Harvard University, Center for European Studies > CES Working Papers/Open Forum
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 06 Feb 2020 11:20
    Number of Pages: 39
    Last Modified: 06 Feb 2020 11:20
    URI: http://aei.pitt.edu/id/eprint/102394

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