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EU Regional Policy and Tax Competition

Author

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  • Johannes Becker

    () (Oxford University Centre for Business Taxation)

  • Clemens Fuest

    () (Oxford University Centre for Business Taxation)

Abstract

The European Union provides coordination and financing of trans-European transport infrastructures, i.e. roads and railways, which link the EU Member States and reduce the cost of transport and mobility. This raises the question of whether EU involvement in this area is justified by inefficiencies of national infrastructure policies. Moreover, an often expressed concern is that policies enhancing mobility may boost tax competition. We analyse these questions using a model where countries compete for the location of profitable firms. We show that a coordination of investment in transport cost reducing infrastructures within union countries enhances welfare and mitigates tax competition. In contrast, with regard to union-periphery infrastructure, the union has an interest in a coordinated reduction of investment expenditures. Here, the effects on tax competition are ambiguous. Our results provide a rationale for EU-level regional policy that supports the development of intra-union infrastructure.

Suggested Citation

  • Johannes Becker & Clemens Fuest, 2009. "EU Regional Policy and Tax Competition," Working Papers 0902, Oxford University Centre for Business Taxation.
  • Handle: RePEc:btx:wpaper:0902
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    References listed on IDEAS

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    Cited by:

    1. Heidhues, Paul & Koszegi, Botond, 2014. "Regular prices and sales," Theoretical Economics, Econometric Society.
    2. Alexander Haupt & Tim Krieger, 2009. "The role of mobility in tax and subsidy competition," Working Papers 2009/37, Institut d'Economia de Barcelona (IEB).
    3. Darby, Julia & Ferrett, Ben & Wooton, Ian, 2014. "Regional centrality and tax competition for FDI," Regional Science and Urban Economics, Elsevier, pages 84-92.
    4. Julia Darby & Ben Ferrett & Ian Wooton, 2013. "FDI, Trade Costs and Regional Asymmetries," CESifo Working Paper Series 4469, CESifo Group Munich.
    5. Kyoko Hirose & Kazuhiro Yamamoto, 2013. "Asymmetric international transport costs and tax competition: the influence of a third country," Discussion Papers 59, Kyushu Sangyo University, Faculty of Economics.
    6. Helena Marques & Hugh Metcalf, 2005. "What Determines Sectoral Trade in the Enlarged EU?," Review of Development Economics, Wiley Blackwell, pages 197-231.
    7. Becker, Johannes & Fuest, Clemens, 2010. "EU regional policy and tax competition," European Economic Review, Elsevier, pages 150-161.
    8. Apergis, Nicholas & Cooray, Arusha, 2014. "Tax revenues convergence across ASEAN, Pacific and Oceania countries: Evidence from club convergence," Journal of Multinational Financial Management, Elsevier, pages 11-21.
    9. Robert Alexander & Rui-cong Sang & Sajid Anwar, 2016. "Regional Policy and Industrial Relocation in China: A Panel Data Analysis," EcoMod2016 9277, EcoMod.
    10. Andra-Madalina, PANTILIE, 2014. "Economic Development From The Perspective Of Regional Policies," Management Strategies Journal, Constantin Brancoveanu University, vol. 26(4), pages 104-110.
    11. Daniel Hopp & Michael Kriebel, 2016. "The political economy of interregional competition for firms," CQE Working Papers 5616, Center for Quantitative Economics (CQE), University of Muenster.
    12. Alexander Chudik & M. Hashem Pesaran, 2016. "Theory And Practice Of Gvar Modelling," Journal of Economic Surveys, Wiley Blackwell, pages 165-197.
    13. Kate Hynes & Jie Ma & Cheng Yuan, 2017. "Transport Infrastructure Investments and Competition for FDI," Working Papers 201718, School of Economics, University College Dublin.
    14. Darby, Julia & Ferrett, Ben & Wooton, Ian, 2013. "FDI, Trade Costs and Regional Asymmetries," SIRE Discussion Papers 2013-106, Scottish Institute for Research in Economics (SIRE).
    15. Johannes Becker & Clemens Fuest, 2009. "EU Regional Policy and Tax Competition," Working Papers 0902, Oxford University Centre for Business Taxation.
    16. Michael Keen & Kai A. Konrad, 2012. "International Tax Competition and Coordination," Working Papers international_tax_competi, Max Planck Institute for Tax Law and Public Finance.
    17. Hopp, Daniel & Kriebel, Michael, 2016. "The political economy of interregional competition for firms," Annual Conference 2016 (Augsburg): Demographic Change 145693, Verein für Socialpolitik / German Economic Association.
    18. Darby, Julia & Ferrett, Ben & Wooton, Ian, 2014. "Regional centrality and tax competition for FDI," Regional Science and Urban Economics, Elsevier, pages 84-92.
    19. Llop, Maria, 2017. "Changes in energy output in a regional economy: A structural decomposition analysis," Energy, Elsevier, pages 145-151.

    More about this item

    Keywords

    European Union; Infrastructure; Regional Policy; Tax Competition;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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