A Bargaining Model of Tax Competition
AbstractThis paper develops a model in which competing governments offer financial incentives to induce individual firms to locate within their jurisdictions. Equilibrium is described under three specifications of the supplementary taxes. There is no misallocation of capital under two of these specifications, and there might or might not be capital misallocation under the third. This result contrasts strongly with that of the standard tax competition model, which does not allow governments to treat firms individually. That model finds that competition among governments almost always leads to capital misallocation.
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Bibliographic InfoPaper provided by McMaster University in its series Department of Economics Working Papers with number 2007-09.
Length: 34 pages
Date of creation: Dec 2007
Date of revision:
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More information through EDIRC
tax competition; bargaining;
Other versions of this item:
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H4 - Public Economics - - Publicly Provided Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-08 (All new papers)
- NEP-PBE-2007-12-08 (Public Economics)
- NEP-URE-2007-12-08 (Urban & Real Estate Economics)
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