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Transfer Pricing and Enforcement Policy in Oligopolistic Markets

Oscar Amerighi ()

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: We set up a symmetric two-country model with two multinationals competing on the quantities and possibly manipulating their transfer prices. Governments choose both the corporate profit tax rate and the level of enforcement of the \arm's length" principle. We show that stronger enforcement increases equilibrium tax rates. We also find that a larger international ownership of multinationals leads to a \race to the top" in both policies between the two countries, while trade liberalization initially implies a \race to the bottom". But as trade becomes free enough, a further decrease in trade costs raises equilibrium tax rates and enforcement policies.

New Economics Papers: this item is included in nep-mic and nep-tra
Date: 2006
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Related works:
Working Paper: Transfer pricing and enforcement policy in oligopolistic markets (2004) Downloads
Working Paper: Transfer pricing and enforcement policy in oligopolistic markets
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Persistent link: http://EconPapers.repec.org/RePEc:bol:bodewp:567

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