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Cross border mergers and strategic trade policy with two-part taxation: is international policy coordination beneficial?
[Grenzüberschreitende Fusionen und strategische Handelspolitik mit zweiseitiger Besteuerung: Ist eine internationale Koordination sinnvoll?]

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  • Lommerud, Kjell Erik
  • Olsen, Trond E.
  • Straume, Odd Rune

Abstract

We analyse how national taxation of firms are likely to affect merger incentives in international markets. In particular, we ask whether non-coordinated trade policies stimulate cross-border mergers that are overall inefficient, and if this is then an argument for international coordination of such policies? We address this issue in a setting where policy makers use two-part tariffs to tax exporting firms. The analysis reveals that while non-coordinated policies may induce cross-border mergers (by allowing the firms in question to play national policy makers out against each other), this can nevertheless be overall welfare enhancing compared to market outcomes under coordinated policy making.

Suggested Citation

  • Lommerud, Kjell Erik & Olsen, Trond E. & Straume, Odd Rune, 2006. "Cross border mergers and strategic trade policy with two-part taxation: is international policy coordination beneficial? [Grenzüberschreitende Fusionen und strategische Handelspolitik mit zweiseiti," Discussion Papers, Research Unit: Market Processes and Governance SP II 2006-24, WZB Berlin Social Science Center.
  • Handle: RePEc:zbw:wzbmpg:spii200624
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    Cited by:

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    More about this item

    Keywords

    Strategic trade policy; two-part taxation; endogenous merger; policy coordination;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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