EU Regional Policy and Tax Competition

Johannes Becker and Clemens Fuest

No 902, Working Papers from Oxford University Centre for Business Taxation

Abstract: The European Union provides coordination and financing of trans-European transport infrastructures, i.e. roads and railways, which link the EU Member States and reduce the cost of transport and mobility. This raises the question of whether EU involvement in this area is justified by inefficiencies of national infrastructure policies. Moreover, an often expressed concern is that policies enhancing mobility may boost tax competition. We analyse these questions using a model where countries compete for the location of profitable firms. We show that a coordination of investment in transport cost reducing infrastructures within union countries enhances welfare and mitigates tax competition. In contrast, with regard to union-periphery infrastructure, the union has an interest in a coordinated reduction of investment expenditures. Here, the effects on tax competition are ambiguous. Our results provide a rationale for EU-level regional policy that supports the development of intra-union infrastructure.

Keywords: European Union; Infrastructure; Regional Policy; Tax Competition (search for similar items in EconPapers)
JEL-codes: F23 H25 H54 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-eec, nep-geo, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: EU regional policy and tax competition (2010)
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