This paper addresses the issues of whether and how economic integration can affect the ability of the central governments to raise tax revenues and lead to a greater decentralisation of the public sector. To this purpose, a country-specific measure of tax erosion is derived. That is used as a determinant of the degree of fiscal federalism. We find that an increase of economic integration causes a decline of the implicit tax rates on mobile capital and the process of tax erosion positively contributes to the growth of public sector decentralisation
Gastaldi, F., Liberati, P., Sciala', A. (2013). Economic integration, tax erosion, and decentralization: an empirical analysis. MODERN ECONOMY, 4(10A), 14-26 [10.4236/me.2013.410A003].