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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 large”. 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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  4. Rainald Borck & Michael Pflüger, 2004. "Agglomeration and Tax Competition," Discussion Papers of DIW Berlin 408, DIW Berlin, German Institute for Economic Research.
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  8. Amiti, Mary & Pissarides, Christopher, 2002. "Trade and Industrial Location with Heterogenous Labour," CEPR Discussion Papers 3366, C.E.P.R. Discussion Papers.
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  10. Ruud de Mooij & S. Ederveen, 2001. "Taxation and foreign direct investment; a synthesis of empirical research," CPB Discussion Paper 3, CPB Netherlands Bureau for Economic Policy Analysis.
  11. Cremer, Helmuth & Pestieau, Pierre, 2004. "Factor mobility and redistribution," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 57, pages 2529-2560 Elsevier.
  12. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
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  14. THISSE, Jacques-François & ZENOU, Yves, . "Skill mismatch and unemployment," CORE Discussion Papers RP -1480, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. Helsley, Robert W. & Strange, William C., 1990. "Matching and agglomeration economies in a system of cities," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 189-212, September.
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  18. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  19. Fredrik Andersson & Rikard Forslid, 2003. "Tax Competition and Economic Geography," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 279-303, 04.
  20. 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.
  21. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
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  23. Head, Keith & Mayer, Thierry & Ries, John, 2002. "On the Pervasiveness of Home Market Effects," CEPR Discussion Papers 3454, C.E.P.R. Discussion Papers.
  24. Thierry Mayer & Keith Head, 2003. "The Empirics of Agglomeration and Trade," Working Papers 2003-15, CEPII research center.
  25. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
  26. Kim, Sunwoong, 1989. "Labor Specialization and the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 692-705, June.
  27. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
  28. 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.
  29. Hamilton, Jonathan & Thisse, Jacques-François & Zenou, Yves, 1999. "Wage Competition with Heterogeneous Workers and Firms," CEPR Discussion Papers 2141, C.E.P.R. Discussion Papers.
  30. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
  31. 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.
  32. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
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