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Inter-Jurisdictional Competition for Firms

  • Robin Boadway

    (Queen's University, Canada)

  • Katherine Cuff

    (McMaster University, Canada)

  • Nicolas Marceau

    (UniversitÈ du QuÈbec ý MontrÈal, Canada)

Regions inhabited with an immobile population of disabled and able individuals compete to attract mobile firms that provide jobs. The redistributive goal of regional governments is to support the disabled, who cannot work. Able individuals may work, be involuntary unemployed because of frictions in the labor market, or choose to be voluntary unemployed. Labor force participation decisions depend on regional redistributive policies. Both the size of workforce and tax on firms affect profits and therefore, firms' location decisions. Allowing regions to engage in tax competition may be efficient. If regions cannot tax firms, they compete by implementing inefficient redistributive policies. Copyright Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 43 (2002)
Issue (Month): 3 (August)
Pages: 761-782

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Handle: RePEc:ier:iecrev:v:43:y:2002:i:3:p:761-782
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