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Competing for Capital in a "Lumpy" World

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Author Info
Kind, Hans Jarle
Midelfart Knarvik, Karen Helene
Schjelderup, Guttorm

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Abstract

This paper uses a new economic geography model to analyze tax competition betweeen two countries trying to attract internationally mobile capital. Each government may levy a source tax on capit al and a lump sum tax on fixed labor. If industry is concentrated in one of the countries, the analysis finds that the host country will gain from setting its source tax on capital above that of the other country. In particular, the host may increase its welfare per capita by setting a positive source tax on capital and capture the positive externality that arise in the agglomeration. If industry is not concentrated, however, both countries will subsidize capital.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 252.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_252

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Find related papers by JEL classification:
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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    Other versions:
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