Tax Competition and Economic Geography

Fredrik Andersson () and Rikard Forslid ()

No 2220, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Tax competition between two countries is considered in a trade-and-location setting with differentiated products and monopolistic competition. There are two groups of workers, mobile ones and immobile ones. Taxes are used for producing a public good. It is shown that an equilibrium with mobile workers dispersed across countries is destabilised by increased taxes on these - and this is shown to be true also for perfectly coordinated tax increases. It is also shown that an agglomeration is taxable, and that increasing public spending may relax the tax pressure on immobile workers consistent with preserving an agglomeration for some levels of taxes.

Keywords: Agglomeration; Economic Geography; Tax Competition (search for similar items in EconPapers)
JEL-codes: F12 F15 F21 R12 (search for similar items in EconPapers)
Date: 1999-08
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Related works:
Journal Article: Tax Competition and Economic Geography (2003)
Working Paper: Tax Competition and Economic Geography (2000)
Working Paper: Tax Competition and Economic Geography (1999)
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