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International audience ; Tax competition is often associated with the "race to the bottom:" a decrease in the tax rate of one jurisdiction (country, region or municipality) triggers similar reactions in neighboring jurisdictions. This race can be related to two properties of the tax competition game: positive tax spillovers and the strategic complementarity of tax rates. Using tools from generalized concavity, more precisely -concavity, and supermodular games, this paper offers a simple yet unifying perspective on the fundamental forces that shape tax competition. The main results characterize sufficient conditions on the marginal productivity of tax competing jurisdictions to predict a "race to the bottom." These conditions bind the curvature of the demand for capital of each tax-competing jurisdiction. Quadratic production function respects these, while Cobb–Douglas form requires an additional condition. We deduce several results: at least one pure-strategy Nash equilibrium exists and is unique. Going beyond our specific framework, we apply some results of supermodular games with positive spillovers: in case of multiple equilibriums, tax coordination is Pareto improving; but the coalition of a subgroup of countries does not achieve neither tax coordination, nor tax cooperation. Establishing similar sufficient conditions for the supermodularity of the tax competition game with welfare maximizers raises multiple issues. Besides the question of the nature of public spending, we discuss the role of capital by considering an elastic worldwide stock of capital, capital ownership, and offshore centers.

International audience ; Tax competition is often associated with the "race to the bottom:" a decrease in the tax rate of one jurisdiction (country, region or municipality) triggers similar reactions in neighboring jurisdictions. This race can be related to two properties of the tax competition game: positive tax spillovers and the strategic complementarity of tax rates. Using tools from generalized concavity, more precisely -concavity, and supermodular games, this paper offers a simple yet unifying perspective on the fundamental forces that shape tax competition. The main results characterize sufficient conditions on the marginal productivity of tax competing jurisdictions to predict a "race to the bottom." These conditions bind the curvature of the demand for capital of each tax-competing jurisdiction. Quadratic production function respects these, while Cobb–Douglas form requires an additional condition. We deduce several results: at least one pure-strategy Nash equilibrium exists and is unique. Going beyond our specific framework, we apply some results of supermodular games with positive spillovers: in case of multiple equilibriums, tax coordination is Pareto improving; but the coalition of a subgroup of countries does not achieve neither tax coordination, nor tax cooperation. Establishing similar sufficient conditions for the supermodularity of the tax competition game with welfare maximizers raises multiple issues. Besides the question of the nature of public spending, we discuss the role of capital by considering an elastic worldwide stock of capital, capital ownership, and offshore centers.

The purpose of this article is to provide an economic analysis of the relationship between economic integration and political fragmentation. This follows previous contributions from Alesina et al (2000), Casella (2001, Casella and Feinstein (2002), or Leite-Monteiro and Sato (2003). We go a step further than these authors by assuming that economic integration and political fragmentation are both decided by a majority vote. As them, we observe that economic integration involves political fragmentation. But, we establish also that economic integration might be sometimes deterred by the majority to prevent political fragmentation from happening.

The purpose of this note is to correct an error in the seminal article on secession by Buchanan and Faith (1987). In their paper, Buchanan and Faith neglected an important effect: political separation affects markets and consequently individual private incomes.

We consider as endogenous the choice of the delegation' rule in a political integration process between two countries. We study three potential types of delegation: strong, weak or no delegation, this last case corresponding to a referendum. We show that populations decide to bind themselves by delegating the national policy decision to a "powerfull conservative representative", in order to improve their bargaining position. These non-cooperative behaviors of countries when they decide on their delegation rule induce negative political externalities between countries, which cancel the gains achieved by the internalization of economic externalities in the case of political integration. We then propose two extensions. First, we assume a pre-play game where the countries choose whether or not to initiate political integration. Secondly, we examine the consequences of ratification by referendum. We conclude that a Pareto improvement of the political integration process would be to specify within the international treaty itself the means for its ratification; more precisely, to incorporate a formal ratification procedure, corresponding to an ex post referendum.

The purpose of this note is to correct an error in the seminal article on secession by Buchanan and Faith (1987). In their paper, Buchanan and Faith neglected an important effect: political separation affects markets and consequently individual private incomes.

The purpose of this article is to provide an economic analysis of the relationship between economic integration and political fragmentation. This follows previous contributions from Alesina et al (2000), Casella (2001, Casella and Feinstein (2002), or Leite-Monteiro and Sato (2003). We go a step further than these authors by assuming that economic integration and political fragmentation are both decided by a majority vote. As them, we observe that economic integration involves political fragmentation. But, we establish also that economic integration might be sometimes deterred by the majority to prevent political fragmentation from happening.

The purpose of this note is to correct an error in the seminal article on secession by Buchanan and Faith (1987). In their paper, Buchanan and Faith neglected an important effect: political separation affects markets and consequently individual private incomes.

We consider as endogenous the choice of the delegation' rule in a political integration process between two countries. We study three potential types of delegation: strong, weak or no delegation, this last case corresponding to a referendum. We show that populations decide to bind themselves by delegating the national policy decision to a "powerfull conservative representative", in order to improve their bargaining position. These non-cooperative behaviors of countries when they decide on their delegation rule induce negative political externalities between countries, which cancel the gains achieved by the internalization of economic externalities in the case of political integration. We then propose two extensions. First, we assume a pre-play game where the countries choose whether or not to initiate political integration. Secondly, we examine the consequences of ratification by referendum. We conclude that a Pareto improvement of the political integration process would be to specify within the international treaty itself the means for its ratification; more precisely, to incorporate a formal ratification procedure, corresponding to an ex post referendum.

AbstractThe aim of this paper is to generalize the endogenous timing game proposed by Hamilton and Slutsky (Games and Economic Behavior, 1990, 2, pp. 29–46) by allowing the payoff or the marginal payoff of a player to become non‐monotonic with respect to the strategy of the opponent. We propose a taxonomy of the subgame‐perfect Nash equilibria based on the characteristics of the payoff functions proposed by Eaton (Canadian Journal of Economics, 2004, 37, pp. 805–29). We determine under which conditions of the initial payoff functions commitment has a social value and when the simultaneous‐move Nash equilibrium is commitment robust and discuss its Pareto efficiency.

Cet article propose une revue de la littérature consacrée à la décentralisation dans les pays en voie de développement. Reprenant la distinction des fonctions de l'État établie par Musgrave (allocation redistribution et stabilisation) ainsi que deux principes généraux - le principe de proximité politique et celui de compétition – nous établissons une grille de lecture de la littérature étudiée. Un bilan des études empiriques est également établi. La conclusion souligne certaines questions relatives aux travaux empiriques, qui appellent de plusamples investigations.This article offers a literature review on decentralization in developing countries. Considering the three economic functions of the State pointed out by Musgrave (stabilization, distribution and allocation) and two general principles - the proximity and the competition principles- we establish a reading grid of the literature studied. A review of empirical studies is also established. The conclusion underlines certain issues relating to empirical studies that call for further investigations.

Cet article propose une revue de la littérature consacrée à la décentralisation dans les pays en voie de développement. Reprenant la distinction des fonctions de l'État établie par Musgrave (allocation redistribution et stabilisation) ainsi que deux principes généraux - le principe de proximité politique et celui de compétition – nous établissons une grille de lecture de la littérature étudiée. Un bilan des études empiriques est également établi. La conclusion souligne certaines questions relatives aux travaux empiriques, qui appellent de plusamples investigations.This article offers a literature review on decentralization in developing countries. Considering the three economic functions of the State pointed out by Musgrave (stabilization, distribution and allocation) and two general principles - the proximity and the competition principles- we establish a reading grid of the literature studied. A review of empirical studies is also established. The conclusion underlines certain issues relating to empirical studies that call for further investigations.

Intergovernmental grants design is an important issue in developing countries, where the decentralization process involves a huge vertical gap, i.e. an imbalance between the costs of local public competences and local governments' revenue raising powers. Our analysis considers the (dis)incentive effect of simple unconditional central grants on local own-source revenue. We highlight a theoretical ambiguity over the nature of this effect in assuming less efficiency of local governments in collecting taxes than of the central one. Our empirical analysis focuses on Benin. We study the impact of a very simple grant that has the properties of being collected at the borders by customs and being allocated among local governments through a fixed rule (the population of jurisdictions). Our empirical analysis covers panel data of 74 local governments from 2003 to 2008, and addresses potential endogeneity issues of central transfer. We conclude unambiguously with a positive impact of this grant on local own-source revenue. This effect is contingent on a minimum level of wealth of the jurisdiction, and is stronger for local governments that do not share the same political affiliation as the president in office. Our result emphasizes a neglected quality of unconditional transfers whose allocation rule is only based on the population of jurisdictions: their complementarity with local ownsource revenue. Such transfers are not only simpler than other formula-based equalization transfers, but they may also have an incentive effect on local own-source revenue.

We address in this paper the issue of leadership when two governments provide public goods to their constituencies with cross border externalities as both public goods are valued by consumers in both countries. We study a timing game between two different countries: before providing public goods, the two policymakers non-cooperatively decide their preferred sequence of moves. We establish conditions under which a first- or second-mover advantage emerges for each country, highlighting the role of spillovers and the strategic complementarity or substitutability of public goods. As a result we are able to prove that there is no leader when, for both countries, public goods are substitutable. When public goods are complements for both countries, both countries may emerge as the leader in the game. Hence a coordination issue arises. We use the notion of risk-dominance to select the leading government. Lastly, in the mixed case, the government for whom public goods are substitutable becomes the leader.