Competing for a duopoly: international trade and tax competition.(Report) Ferrett, B. (Ben)

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Ferrett, B. (Ben)
Appears In
Canadian Journal of Economics
Taxation - Econometric models.; International trade; Taxation
Academic; Trade
To authenticate to the full-text of this article, please visit this link: Byline: Ben Ferrett (1), Ian Wooton (2) Keywords: F12; F23; H25; H73 Abstract: Abstract. 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. Abstract (Spanish): Concurrence pour attirer un duopole : commerce international et concurrence fiscale. On analyse la concurrence de taxes et subventions entre deux pays hotes potentiels pour attirer des etablissements d'entreprise dans une industrie duopoliste. Alors qu'on sait que la concurrence entre pays identiques pour un investissement par un monopole resulte en une inflation des subventions, deux entreprises peuvent etre taxees en equilibre et les pays hotes s'approprier l'entier surplus social engendre dans l'industrie, et ce malgre la non-cooperation explicite entre gouvernements. Les couts du commerce font que les entreprises preferent une production dispersee plutot que co-localisee, creant des opportunites de taxation pour les pays hotes. On determine l'asymetrie de taille qui modifie la nature de l'equilibre, declenchant une concentration de la production dans le grand pays. Author Affiliation: (1)Loughborough University (2)University of Strathclyde
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