Tax Competition for Heterogeneous Firms with Endogenous Entry

Show simple item record Davies, Ronald B. Eckel, Carsten 2007-10-22T20:53:50Z 2007-10-22T20:53:50Z 2007-03
dc.description 40 p. en
dc.description.abstract This paper models tax competition for mobile firms that are differentiated by the amount of labor needed to cover fixed costs. Because tax competition affects the distribution of firms, it affects both relative equilibrium wages across countries and equilibrium prices. These in turn influence the equilibrium number of firms. From the social planner's perspective, optimal tax rates are harmonized, providing the optimal number of firms, and set such that income is efficiently distributed between private and public consumption. As is common in tax competition models, in the Nash equilibrium tax rates are inefficiently low, yielding underprovision of public goods. Furthermore, there exist a variety of situations in which equilibrium tax rates differ. As a result, too many firms enter the market as governments compete to be the low-tax, high-wage country. This illustrates a new distortion from tax competition and provides an additional benefit from tax harmonization. en
dc.format.extent 203032 bytes
dc.format.mimetype application/pdf
dc.language.iso en_US en
dc.publisher University of Oregon, Dept of Economics en
dc.relation.ispartofseries University of Oregon Economics Department Working Papers ; 2007-6 en
dc.subject Tax competition en
dc.subject Foreign direct investment en
dc.subject Tax harmonization en
dc.title Tax Competition for Heterogeneous Firms with Endogenous Entry en
dc.type Working Paper en

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