With international externalities, different country sizes, imperfect competition, and trade costs, tax competition for mobile firms is efficiency-enhancing with respect to the free market outcome. Under both scenarios, the resulting inefficiencies in international specialization and trade flows vanish when trade costs are low enough. Otherwise, only international tax coordination can implement the efficient spatial distribution of firms. © 2004 Elsevier B.V. All rights reserved.
Market size and tax competition
Ottaviano G. I. P.;
2005
Abstract
With international externalities, different country sizes, imperfect competition, and trade costs, tax competition for mobile firms is efficiency-enhancing with respect to the free market outcome. Under both scenarios, the resulting inefficiencies in international specialization and trade flows vanish when trade costs are low enough. Otherwise, only international tax coordination can implement the efficient spatial distribution of firms. © 2004 Elsevier B.V. All rights reserved.
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