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Competing for capital when labor is heterogeneous

  • Yasuhiro, SATO
  • Jacques-François, THISSE

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

This paper investigates the impacts of capital mobility and tax competition in a setting with imperfect matching between firms and workers. The small country always gains and the large country always loses from tax competition, thus implying tax competition leads to redistribution from the large to the small country. These results imply that our model encapsulates both the “importance of being small†as well as the “importance of being largeâ€. We also show that tax harmonization leads to redistribution from the large to the small country

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Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2005045.

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Length: 22
Date of creation: 01 Sep 2005
Date of revision:
Handle: RePEc:ctl:louvec:2005045
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  17. Ottaviano, Gianmarco I.P. & van Ypersele, Tanguy, 2005. "Market size and tax competition," Journal of International Economics, Elsevier, vol. 67(1), pages 25-46, September.
  18. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
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  25. Peralta, Susana & van Ypersele, Tanguy, 2005. "Factor endowments and welfare levels in an asymmetric tax competition game," Journal of Urban Economics, Elsevier, vol. 57(2), pages 258-274, March.
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  28. Laussel, Didier & Le Breton, Michel, 1998. "Existence of Nash equilibria in fiscal competition models," Regional Science and Urban Economics, Elsevier, vol. 28(3), pages 283-296, May.
  29. Thisse, Jacques-Francois & Zenou, Yves, 2000. "Skill mismatch and unemployment," Economics Letters, Elsevier, vol. 69(3), pages 415-420, December.
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