Tax competition between two countries is considered in a trade- and-location setting with differentiated products and monopolistic competition. There are two groups of workers, mobile ones and immobile ones. Taxes are used for producing a public good. It is shown that an equilibrium with mobile workers dispersed across countries is destabilised by increased taxes on these mobile workers|and this is shown to be true also for perfectly coordinated tax increases. It is also shown that an agglomeration is taxable, and that increasing public spending may relax the minimum tax pressure on immobile workers consistent with preserv-ing an agglomeration.
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Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number
2000:5.
Length: 21 pages Date of creation: 20 May 1999 Date of revision: Handle: RePEc:hhs:sunrpe:2000_0005
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Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F15 - International Economics - - Trade - - - Economic Integration F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
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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.:
David E. Wildasin, 2005.
"Fiscal Competition,"
Working Papers
2005-05, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
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