Tax competition with heterogeneous capital mobility
AbstractIn this paper, we look at corporate fiscal policies set by two competing regions in an environment where firms are heterogonous regarding to their mobility costs. We show that if regions are allow to tax domestic and foreign capital at different rates, they will offer a preferential treatment to foreign firms, even if mobility costs are symmetrically distributed across regions. Preventing such type of preferential treatment raises revenues for both regions, unless there exist a high density of firms with low moving costs. Because preferential tax treatment promotes firms movement for fiscal raisons, such tax regime always generates more social loss due to unnecessary delocalization. We also investigate the effect of heterogeneity among regions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2011/25.
Length: 32 pages
Date of creation: 2011
Date of revision:
tax competition; capital; mobility; preferential and non-preferential tax regimes;
Find related papers by JEL classification:
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
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.:
- Hagen, K.P. & Osmundsen, P. & Schjelderup, G., 1995. "Internationally Mobile Firms and Tax Policy," Papers 8/95, Norwegian School of Economics and Business Administration-.
- Konrad, Kai A & Kovenock, Dan, 2008.
"Competition for FDI with Vintage Investment and Agglomeration Advantages,"
CEPR Discussion Papers
6740, C.E.P.R. Discussion Papers.
- Konrad, Kai A. & Kovenock, Dan, 2009. "Competition for FDI with vintage investment and agglomeration advantages," Journal of International Economics, Elsevier, vol. 79(2), pages 230-237, November.
- Kai A. Konrad & Dan Kovenoch, 2009. "Competition for FDI with vintage investment and agglomeration advantages," Working Papers 2009/18, Institut d'Economia de Barcelona (IEB).
- Konrad, Kai A. & Kovenock, Dan, 2008. "Competition for FDI with vintage investment and agglomeration advantages," Discussion Papers, Research Unit: Market Processes and Governance SP II 2008-09, Social Science Research Center Berlin (WZB).
- Kai A. Konrad & Dan Kovenock, 2008. "Competition for FDI with vintage investment and agglomeration advantages," Purdue University Economics Working Papers 1210, Purdue University, Department of Economics.
- Keen, Michael, 2001. "Preferential Regimes Can Make Tax Competition Less Harmful," National Tax Journal, National Tax Association, vol. 54(n. 4), pages 757-62, December .
- Wildasin, David E. & Wilson, John Douglas, 1996. "Imperfect mobility and local government behaviour in an overlapping-generations model," Journal of Public Economics, Elsevier, vol. 60(2), pages 177-198, May.
- Sebastian Krautheim & Tim Schmidt-Eisenlohr, 2012.
"Wages and International Tax Competition,"
CESifo Working Paper Series
3867, CESifo Group Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.