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The ALEC rankings: does smaller government mean higher growth?

POSTED ON August 17th  - POSTED IN Blog, Tax

There are a lot of ‘competitiveness’-related rankings of countries and states out there, from the World Economic Forum’s Global Competitiveness Report, to the World Bank’s Ease of Doing Business rankings. (We’ll address some of these in due course.) It’s interesting to note, for starters, that the highly taxed, highly regulated Scandinavian economies seem to do just as well as their low-tax, lightly regulated peers. Recently we made up a little graph to illustrate this, looking at the WEF’s ranking:

Source: WEF, Conference board. The sample of countries included those with comparable levels of GDP per capita, and excluding micro-states which often have their own ‘tax haven’ growth dynamics. The cut-off was to use states with GDP per capita (PPP) of above $20,000 on average from 1989-2013. Source: Conference Board data tables.

Source: World Economic Forum, Conference Board. The sample of countries included those with comparable levels of GDP per capita, and excluding micro-states which often have their own ‘tax haven’ growth dynamics. We used states with GDP per capita (PPP) of above $20,000 on average from 1989-2013. Source: Conference Board data tables.

There’s no obvious trend here, is there? The high-tax countries seem to be just as ‘competitive’ as the low-tax ones, it seems, even on the WEF’s measures, (which are somewhat skewed toward the low-tax, light regulation model.) The non-trend you see in this graph is just as Martin Wolf, Paul Krugman and various others would have predicted.

Competitiveness: was Charles Tiebout joking?

POSTED ON April 23rd  - POSTED IN Blog, Tax, What is competitiveness?
The Tiebout model of cross-border migration

The Tiebout model of cross-border human migration

Do nations or states ‘compete’ with each other in a meaningful way? We have already explored the thinking of Paul Krugman, Adam Smith, Robert Reich, and the Tax Justice Network on this question. Their answers are, to summarise broadly: ‘no – or at least not in the way people commonly suppose.’

This ‘competition’ between states, we’ve argued, bears no economic relation to the microeconomic competition between firms or companies in a market. The shortest way to illustrate this, perhaps, is to note that a failed company is one thing: a failed state is another beast altogether.

But there are influential people who disagree.

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