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Tax Reform, Delocation and Heterogeneous Firms: Base Widening and Rate Lowering Reforms

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Author Info
Baldwin, Richard
Okubo, Toshihiro

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Abstract

We model international tax competition allowing for agglomeration forces and heterogeneous firms. This provides a new perspective since a tax schedules have different effects on the international relocation decision of small and large firms (large firms are endogenously more sensitive to tax competition) and these decisions affect industry productivity in addition to the usual effects. The model allows us to study rate-lowering base-widening reforms. We show it is generally possible to design such a reforms that raises revenue without losing firms.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6843.

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Date of creation: May 2008
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Handle: RePEc:cpr:ceprdp:6843

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Related research
Keywords: agglomeration; heterogeneous firms; tax reform;

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Find related papers by JEL classification:
H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November. [Downloadable!] (restricted)
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  3. Burbidge, John & Cuff, Katherine & Leach, John, 2006. "Tax competition with heterogeneous firms," Journal of Public Economics, Elsevier, vol. 90(3), pages 533-549, February. [Downloadable!] (restricted)
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  4. Rodney D. Ludema & Ian Wooton, 1998. "Economic Geography and the Fiscal Effects of Regional Integration," Working Papers 9809, Department of Economics, University of Glasgow. [Downloadable!]
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  5. Haufler, Andreas & Schjelderup, Guttorm, 2000. "Corporate Tax Systems and Cross Country Profit Shifting," Oxford Economic Papers, Oxford University Press, vol. 52(2), pages 306-25, April.
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  6. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December. [Downloadable!] (restricted)
  7. Fredrik Andersson & Rikard Forslid, 2003. "Tax Competition and Economic Geography," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 279-303, 04. [Downloadable!] (restricted)
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  8. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November. [Downloadable!] (restricted)
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  9. Davis, Donald R. & Weinstein, David E., 1999. "Economic geography and regional production structure: An empirical investigation," European Economic Review, Elsevier, vol. 43(2), pages 379-407, February. [Downloadable!] (restricted)
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  10. Auriol, Emmanuelle & Warlters, Michael, 2005. "Taxation base in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 625-646, April. [Downloadable!] (restricted)
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Cited by:
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  1. Sebastian Krautheim & Tim Schmidt-Eisenlohr, 2009. "Heterogeneous Firms, 'Profit Shifting' FDI and International Tax Competition," Economics Working Papers ECO2009/15, European University Institute. [Downloadable!]
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