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The effects of labour unions on international capital tax competition

Author

Listed:
  • Nelly Exbrayat
  • Carl Gaigné
  • Stéphane Riou

Abstract

We analyze the impact of labour market rigidities on tax competition between two imperfectly integrated countries. Following a shift from a competitive to a unionized labour market in both countries, the capital tax can be adjusted upward in the country with the less rigid labour market, whereas the capital tax is always adjusted downward in the other country. Moreover, by reducing the labour cost differential between countries, trade liberalization gives rise to tax and welfare convergences. Finally, when a country adopts a flexible labour market, the unionized country may attract the majority of capital.

Suggested Citation

  • Nelly Exbrayat & Carl Gaigné & Stéphane Riou, 2012. "The effects of labour unions on international capital tax competition," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1480-1503, November.
  • Handle: RePEc:cje:issued:v:45:y:2012:i:4:p:1480-1503
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    Citations

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    Cited by:

    1. Nelly Exbrayat & Benny Geys, 2016. "Economic Integration, Corporate Tax Incidence and Fiscal Compensation," The World Economy, Wiley Blackwell, vol. 39(11), pages 1792-1811, November.
    2. MORITA Tadashi & SAWADA Yukiko & YAMAMOTO Kazuhiro, 2016. "Subsidy Competition, Imperfect Labor Market, and Endogenous Entry of Firms," Discussion papers 16096, Research Institute of Economy, Trade and Industry (RIETI).
    3. Nelly Exbrayat, 2016. "Does trade liberalization trigger tax competition? Theory and evidence from OECD countries," Working Papers 1620, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    4. repec:bla:germec:v:19:y:2018:i:4:p:466-492 is not listed on IDEAS
    5. repec:bla:worlde:v:40:y:2017:i:4:p:703-714 is not listed on IDEAS
    6. repec:bla:worlde:v:40:y:2017:i:1:p:88-115 is not listed on IDEAS
    7. Nelly Exbrayat, 2016. "Does trade liberalization trigger tax competition? Theory and evidence from OECD countries," Working Papers halshs-01328769, HAL.
    8. Sebastian Krautheim & Tim Schmidt-Eisenlohr, 2016. "Wages and International Tax Competition," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 893-923, November.
    9. MORITA Tadashi & OGAWA Yoshitomo & ONO Yoshiyasu, 2017. "Corporate Tax Competition in the Presence of Unemployment," Discussion papers 17118, Research Institute of Economy, Trade and Industry (RIETI).
    10. Exbrayat, Nelly & Geys, Benny, 2012. "Trade integration and business tax differentials: Evidence from OECD countries," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2012-110, WZB Berlin Social Science Center.
    11. Jota Ishikawa & Toshihiro Okubo, 2017. "Greenhouse-Gas Emission Controls and Firm Locations in North–South Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 637-660, August.
    12. Gillet, Holger & Pauser, Johannes, 2014. "Efficiency in public input provision in two asymmetric jurisdictions with imperfect labour markets," IAB Discussion Paper 201411, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    13. Nelly Exbrayat & Benny Geys, 2014. "Trade integration and corporate income tax differentials," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(2), pages 298-323, April.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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