Does tax competition make mobile firms more footloose?

Ian Wooton (), Ben Ferrett and Andreas Hoefele

No 11325, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Existing analyses of fiscal competition for foreign direct investment (FDI) often assume a one-shot interaction between governments and the firm within a static environment where the firm makes a permanent location choice. We examine a two-period regional model where economic geography evolves, giving the firm an incentive to relocate between periods. Government competition for FDI leads the firm to make efficient location choices, with relocation “more likely†in the presence of international tax competition, because the winning country’s bid absorbs some of the firm’s relocation costs. With more time periods, tax competition induces firm relocation sooner than in its absence.

Keywords: Fdi; Dynamic fiscal competition; Geographical change; Efficiency (search for similar items in EconPapers)
JEL-codes: F23 H25 R38 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-cse, nep-int, nep-pbe, nep-pub and nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Does tax competition make mobile firms more footloose? (2019)
Journal Article: Does tax competition make mobile firms more footloose? (2019)
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