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Competing for a duopoly: international trade and tax competition
We analyse the tax/subsidy competition between two potential host governments to attract the plants of firms in a duopolistic industry. While competition between identical countries for a monopolist’s investment is known to result in subsidy inflation,two firms can be taxed in equilibrium with the host countries appropriating the entire social surplus generated within the industry, despite explicit non-cooperation between governments. Trade costs mean that the firms prefer dispersed to co-located production,creating these taxation opportunities for the host countries. We determine the country-size asymmetry that changes the nature of the equilibrium, inducing concentration of production in the larger country.
History
School
- Business and Economics
Department
- Economics
Published in
Canadian Journal of EconomicsVolume
43Issue
(3)Pages
Pp.776 - 794Citation
FERRETT, B. and WOOTON, I., 2010. Competing for a duopoly: international trade and tax competition. Canadian Journal of Economics, 43 (3), pp.776-794.Publisher
John Wiley and Sons (© Canadian Economics Association)Version
- AM (Accepted Manuscript)
Publisher statement
This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/Publication date
2010Notes
This is the peer reviewed version of the following article: FERRETT, B. and WOOTON, I., 2010. Competing for a duopoly: international trade and tax competition. Canadian Journal of Economics, 43 (3), pp.776-794, which has been published in final form at: http://dx.doi.org/10.1111/j.1540-5982.2010.01594.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.ISSN
0008-4085eISSN
1540-5982Publisher version
Language
- en