A Bargaining Model of Tax Competition
AbstractThis paper develops a model in which competing governments offer financial incentives to individual firms to induce the 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 almost always finds that competition among governments leads to the misallocation of capital.
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Bibliographic InfoPaper provided by Vancouver School of Economics in its series Microeconomics.ca working papers with number han-05-12-02-10-57-12.
Length: 0 pages
Date of creation: 02 Dec 2005
Date of revision: 04 Dec 2007
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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
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- John Leach, 2008. "Equalization Payments in a Bargaining Model of Tax Competition," Department of Economics Working Papers 2008-01, McMaster University.
- Bruno De Borger & Wilfried Pauwels, 2010. "A Nash bargaining solution to models of tax and investment competition: tolls and investment in serial transport corridors," Working Papers 2010/1, Institut d'Economia de Barcelona (IEB).
- Osiris J. Parcero, 2009. "Optimal country's policy towards multinationals when local regions can choose between firm-specific and non-firm-specific policies," Working Papers 2009/34, Institut d'Economia de Barcelona (IEB).
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