Models with imperfect competition and intra-industry trade have become widely accepted as appropriate frameworks within which to analyze the impact of trade liberalization on industrial agglomeration. This paper makes one modification to the standard model; it allows for taxation of internationally mobile capital. Making this change fundamentally alters the main lesson from the tax literature that a country which faces a perfectly elastic supply of capital should not use source-based taxes on capital income.
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Paper provided by Norwegian School of Economics and Business Administration- in its series Papers with number
7/98.
Length: 21 pages Date of creation: 1998 Date of revision: Handle: RePEc:fth:norgee:7/98
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Find related papers by JEL classification: F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements F15 - International Economics - - Trade - - - Economic Integration H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
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