Closer international integration is putting increasing pressure on existing national tax structures. This paper uses a simple two-country model to address a range of consequent policy concerns, focusing particularly on the role of country size. Differences in size exacerbate the inefficiency from noncooperative behavior, harming both countries. The smaller country loses from harmonization to any tax rate between those set in the noncooperative equilibrium, but both countries gain from the imposition of a minimum tax anywhere in that range. The fully optimal response to freer cross-border trade, however, may be to do nothing.

The objective of this paper is to investigate the "conventional wisdom" that there is a policy conflict between the reduction of inequality and the encouragement of entrepreneurial risk taking. The paper attempts to provide a precise statement of this conflict in the context of the progressivity of tax regimes. Using the method of inequality decomposition analysis, a taxonomy is developed which locates the sources of the policy conflict in a precise fashion. A detailed analysis then shows that the conventional wisdom is misleading if not wrong, and that in many cases the claimed policy conflict is quite simply illusory.

Abstract Empirical evidence on distributional preferences shows that people do not judge inequality as problematic per se but that they take into account the fairness or unfairness of the outcome. This article conceptualizes a view of unfair inequality and introduces a new measure of inequality based on two widely held fairness principles: equality of opportunity and freedom from poverty. It develops a method for decomposing inequality and its trends into an unfair and a fair component. We provide two empirical applications of our measure. First, we analyse the development of inequality in the US from 1969 to 2014 from a fairness perspective. Second, we conduct a corresponding international comparison between the US and 31 European countries in 2010. Our results document that unfair inequality matches the well-documented inequality growth in the US since 1980. This trend is driven by decreases in social mobility, i.e., increasing importance of parental education and occupation for the income of their children. Among the 32 countries of our international comparison, the land of opportunity ranks among the most unfair societies in 2010.