How labor market rigidities shape business taxation in a global economy?
We investigate the impact of trade liberalization upon the taxation of capital within a context of labor market rigidities. Using a model of trade and location, we show that labor market imperfections not only strengthen tax competition but also affect the relationship between trade integration and tax policies. Capital taxation follows a J-shaped relationship with trade costs when labor markets are flexible, whereas it may increase with falling trade costs in the presence of trade unions acting as Stackelberg leaders or playing simultaneously with governments. In addition, we analyze the outcome which arises from di§erences between the various countries' labor market institutions. Trade liberalization reduces the international differences in wage and capital taxation, making the unionized country more attractive.
|Date of creation:||2010|
|Date of revision:|
|Publication status:||Published in Working paper GATE 2010-28. 2010|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00537021|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- LEITE-MONTEIRO, Manuel & Maurice MARCHAND & Pierre PESTIEAU, .
"Employment subsidy with capital mobility,"
CORE Discussion Papers RP
1609, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Carl Gaigne & Stéphane Riou, 2007.
"Globalization, Asymmetric Tax Competition, and Fiscal Equalization,"
- Carl Gaigné & Stéphane Riou, 2007. "Globalization, Asymmetric Tax Competition, and Fiscal Equalization," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(5), pages 901-925, October.
When requesting a correction, please mention this item's handle: RePEc:hal:journl:halshs-00537021. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.