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Abstract
We set up a simple two-country model of tax competition where firms with different productivity decide in which location to produce and sell output. In this model, a unique, asymmetric Nash equilibrium is shown to exist, provided that countries are sufficiently different with respect to their exogenous market size. Sorting of firms occurs in equilibrium, as the smaller country levies the lower tax rate and attracts the low-cost firms. A simultaneous expansion of both markets that raises the profitability of firms intensifies tax competition and causes both countries to reduce their tax rates, despite higher corporate tax bases.
Dokumententyp: | Zeitschriftenartikel |
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Fakultät: | Volkswirtschaft
Volkswirtschaft > Lehrstühle > Seminar für Wirtschaftspolitik |
Themengebiete: | 300 Sozialwissenschaften > 330 Wirtschaft |
Sprache: | Englisch |
Dokumenten ID: | 20412 |
Datum der Veröffentlichung auf Open Access LMU: | 15. Apr. 2014, 08:59 |
Letzte Änderungen: | 04. Nov. 2020, 13:01 |
Alle Versionen dieses Dokumentes
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Tax competition in a simple model with heterogeneous firms: How larger markets reduce profit taxes. (deposited 24. Nov. 2009, 15:15)
- Tax competition in a simple model with heterogeneous firms: How larger markets reduce profit Taxes. (deposited 15. Apr. 2014, 08:59) [momentan angezeigt]