Intra‐regional Tax Competition and Economic Geography

Ossip Hühnerbein and Tobias Seidel

The World Economy, 2010, vol. 33, issue 8, 1042-1051

Abstract: In this paper, we extend a solvable version of the core–periphery agglomeration model to four countries located in two regions to show that governments in the agglomerated region may not be able to levy a tax premium on mobile capital if there is intra‐regional tax competition. This hypothesis challenges standard results in the literature and delegates clarification to empirical research. With respect to welfare, we find that intra‐regional tax competition is detrimental from a welfare perspective and that tax harmonisation unambiguously makes both countries in the core region better off.

Date: 2010
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https://doi.org/10.1111/j.1467-9701.2010.01312.x

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Working Paper: Intra-regional Tax Competition and Economic Geography (2007)
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