This paper analyzes tax competition theory in an experimental setting.
Economically trained students act as government and must select a labor and a capital tax
rate to fund a public good, both in closed and open economy settings. Several results
emerge: i) There is only weak evidence that better students choose labor tax rates closer to
their (Nash) optima. ii) Tax rates on capital fall when capital becomes mobile, but much less
so than theory predicts. iii) In the open economy female students choose about 9
percentage points higher tax rates on capital than male students. iv) Political ideology
influences capital tax rate choices in the open economy when subjects are matched on the
basis of party preference, but not when randomly matched. With political preference
matching left leaning students choose about 8 percentage points higher tax rates on capital
than right of center students, even though rational behavior predicts no relevance for
political ideology.
Keywords: Tax Competition, Political Preference, Experiment
Additional information:
Version 2010 s. [Weitere URL]
Dieser Eintrag ist Teil der Universitätsbibliographie.
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