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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?]

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

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.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Processes and Governance with number SP II 2006-24.

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Date of creation: 2006
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Handle: RePEc:zbw:wzbmpg:spii200624
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