Symmetric tax competition and welfare with footloose capital

Dao Zhi Zeng, Shin Kun Peng

研究成果: Article査読

抄録

This paper examines the tax competition for mobile capital between two symmetric countries in a monopolistic competition economy. Taxation generates its own distortions of location and consumption as long as consumers/governments deviate from the symmetric equilibrium. Taking all possible distortions into account, this paper finds that the equilibrium tax rate may be positive and increasing when trade costs are high while it is negative and decreasing when trade costs are low if consumers have additively separable preferences displaying an increasing relative love for variety. This nonmonotonic relationship of tax rate with trade costs is further accompanied by welfare loss when market integration starts. The procompetitive effect and the income effect are both crucial to deriving the results.

本文言語English
ページ(範囲)472-491
ページ数20
ジャーナルJournal of Regional Science
61
2
DOI
出版ステータスPublished - 2021 3

ASJC Scopus subject areas

  • 開発
  • 環境科学(その他)

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