Local Fiscal Strategy to Retain Heterogeneous Firms
AbstractThis paper is about the strategy of retaining unobserveably heterogeneous firms attracted by unobserveably valued outside alternatives. We prove that differentiating tax/public good fiscal packages within one?s own locale dominates offering the same packages to all firms. We rationalize the full range of observed practice by considering more than one type of firm, more than one type of fiscal instrument, and all kinds of utility in alternative locations, under asymmetric information. Mobile agents can earn rents under some conditions, and immobile agents earn rents under others. Ways to minimize budgetary exposure in tax wars and effects on the composition of local economies are discussed.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 10166.
Date of creation: 01 Nov 2002
Date of revision:
Publication status: Published in Journal of Regional Science, November 2002, vol. 42 no. 4, pp. 753-771
Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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Other versions of this item:
- Maureen Kilkenny & Tigran Melkonyan, 2002. "Local Fiscal Strategy to Retain Heterogeneous Firms," Journal of Regional Science, Wiley Blackwell, vol. 42(4), pages 753-771.
- NEP-ALL-2003-01-19 (All new papers)
- NEP-PUB-2003-01-19 (Public Finance)
- NEP-URE-2003-01-19 (Urban & Real Estate Economics)
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