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Tax Competition and Economic Integration

Listed author(s):
  • Kurt A. Hafner

This article examines the role of tax competition and economic integration in a core–periphery setting, where agglomeration forces are present. I present a New Economic Geography model, which accounts for firm entry/exit and international mobility of skilled labor employed in the public R&D sectors. In contrast to other literature on tax competition, I focus on its impact on labor migration and net earnings of skilled and unskilled labor. Economic integration is modeled as trade liberalization, an easing of factor mobility restrictions and technology diffusion. I find that tax competition favors skilled labor when trade costs are reduced. In contrast, unskilled labor benefits when factor mobility restrictions are eased and technology diffusion is enhanced.

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File URL: http://hdl.handle.net/10.1111/rode.12124
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Article provided by Wiley Blackwell in its journal Review of Development Economics.

Volume (Year): 19 (2015)
Issue (Month): 1 (February)
Pages: 45-61

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Handle: RePEc:bla:rdevec:v:19:y:2015:i:1:p:45-61
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  1. Borck, Rainald & Pfluger, Michael, 2006. "Agglomeration and tax competition," European Economic Review, Elsevier, vol. 50(3), pages 647-668, April.
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  17. repec:hhs:iuiwop:430 is not listed on IDEAS
  18. Forslid, Rikard, 1999. "Agglomeration with Human and Physical Capital: an Analytically Solvable Case," CEPR Discussion Papers 2102, C.E.P.R. Discussion Papers.
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