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Tax Competition and Economic Geography

  • Forslid, Rikard

    ()

    (Dept. of Economics, Stockholm University)

  • Andersson, Fredrik

    ()

    (Lund University)

Tax competition between two countries is considered in a trade- and-location setting with differentiated products and monopolistic competition. There are two groups of workers, mobile ones and immobile ones. Taxes are used for producing a public good. It is shown that an equilibrium with mobile workers dispersed across countries is destabilised by increased taxes on these mobile workers|and this is shown to be true also for perfectly coordinated tax increases. It is also shown that an agglomeration is taxable, and that increasing public spending may relax the minimum tax pressure on immobile workers consistent with preserv-ing an agglomeration.

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Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2000:5.

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Length: 21 pages
Date of creation: 20 May 1999
Date of revision:
Handle: RePEc:hhs:sunrpe:2000_0005
Contact details of provider: Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
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