Tax Reform, Delocation and Heterogeneous Firms: Base Widening and Rate Lowering Reforms

Richard Baldwin and Toshihiro Okubo ()

No 6843, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We model international tax competition allowing for agglomeration forces and heterogeneous firms. This provides a new perspective since a tax schedules have different effects on the international relocation decision of small and large firms (large firms are endogenously more sensitive to tax competition) and these decisions affect industry productivity in addition to the usual effects. The model allows us to study rate-lowering base-widening reforms. We show it is generally possible to design such a reforms that raises revenue without losing firms.

Keywords: agglomeration; heterogeneous firms; tax reform (search for similar items in EconPapers)
JEL-codes: H32 P16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc and nep-pbe
Date: Written 2008-05

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