Competing for Capital in a "Lumpy" World

Hans Jarle Kind (), Karen Helene Midelfart Knarvik and Guttorm Schjelderup ()

No CESifo Working Paper No. 252, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper uses a new economic geography model to analyze tax competition betweeen two countries trying to attract internationally mobile capital. Each government may levy a source tax on capit al and a lump sum tax on fixed labor. If industry is concentrated in one of the countries, the analysis finds that the host country will gain from setting its source tax on capital above that of the other country. In particular, the host may increase its welfare per capita by setting a positive source tax on capital and capture the positive externality that arise in the agglomeration. If industry is not concentrated, however, both countries will subsidize capital.

JEL-codes: H25 H54 H87 (search for similar items in EconPapers)
Date: 2000
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Related works:
Working Paper: Competing for Capital in a "Lumpy" World (1999)
Working Paper: Competing for Capital in a 'Lumpy' World (1999)
Journal Article: Competing for capital in a 'lumpy' world (2000)
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Persistent link: http://EconPapers.repec.org/RePEc:ces:ceswps:_252

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