Tax Reform, Delocation, and Heterogeneous Firms

Richard Baldwin and Toshihiro Okubo

Scandinavian Journal of Economics, 2009, vol. 111, issue 4, 741-764

Abstract: The standard international tax model is extended to allow for heterogeneous firms when agglomeration forces are important, enabling us to study the relocation effects of taxes that vary according to firm size. We show that allowing for heterogeneity permits a given tax scheme to have an endogenously different effect on the location decision of small and big firms, with the biggest firms being endogenously more likely to relocate in reaction to high taxes. We show that a reform that flattens the tax–firm–size profile can raise tax revenue without inducing any relocation.

Date: 2009
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https://doi.org/10.1111/j.1467-9442.2009.01582.x

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Working Paper: Tax reform, delocation and heterogeneous firms (2009)
Working Paper: Tax reform, delocation and heterogeneous firms (2009)
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