Tax competition, trade liberalization, and imperfect labour markets

Peter Egger and Tobias Seidel

Oxford Economic Papers, 2011, vol. 63, issue 4, 722-739

Abstract: In this paper, we study the link between trade liberalization and imperfect labour markets for tax competition. We show that rigid labour markets increase the mobility of the tax base as compared to perfect labour markets translating into lower Nash tax rates. Lower trade barriers exhibit a similar effect. It turns out that the imperfect labour market and the trade liberalization channels are interdependent. Copyright 2011 Oxford University Press 2011 All rights reserved, Oxford University Press.

Date: 2011
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