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Title: Does tax competition make mobile firms more footloose?
Authors: Ferrett, Benjamin E.
Hoefele, Andreas
Wooton, Ian
Keywords: FDI
Dynamic tax competition
Geographical change
Issue Date: 2018
Publisher: Wiley
Citation: FERRETT, B.E., HOEFELE, A. and WOOTON, I., 2018. Does tax competition make mobile firms more footloose?. Canadian Journal of Economics / Revue Canadienne d'Économique, In Press.
Abstract: We examine a two-period regional model with evolving economic geography, potentially creating incentives for firm relocation between periods. We argue that tax competition makes firms more footloose, but that this increases efficiency relative to the laissez-faire outcome. We establish that: (1) tax competition leads to efficient investment outcomes; and (2) firm mobility is greater with tax competition than with a laissez-faire regime. When relocation is costly, there can be too little mobility over time, as firms do not take into account the impact of FDI on social welfare in each country. With lump-sum taxes or transfers, firms capture these benefits and internalize them, such that tax competition leads to the efficient outcomes. When more time periods are examined, tax competition induces firm relocation sooner than in its absence.
Description: This paper is in closed access until 2 years after publication.
Version: Accepted for publication
URI: https://dspace.lboro.ac.uk/2134/32567
Publisher Link: https://onlinelibrary.wiley.com/journal/15405982
ISSN: 0008-4085
Appears in Collections:Closed Access (Economics)

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