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Tax Competition and Economic Geography

Rikard Forslid () and Fredrik Andersson ()

No 2000:5, Research Papers in Economics from Stockholm University, Department of Economics

Abstract: Tax competition between two countries is considered in a trade- and-location setting with differentiated products and monopolistic competition. There are two groups of workers, mobile ones and immobile ones. Taxes are used for producing a public good. It is shown that an equilibrium with mobile workers dispersed across countries is destabilised by increased taxes on these mobile workers|and this is shown to be true also for perfectly coordinated tax increases. It is also shown that an agglomeration is taxable, and that increasing public spending may relax the minimum tax pressure on immobile workers consistent with preserv-ing an agglomeration.

Keywords: JEL Classi¯cation: F12; F15; F21; R12 agglomeration; economic geography; tax competition (search for similar items in EconPapers)
JEL-codes: F12 F15 F21 R12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm and nep-pbe
Date: 1999-05-20
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Related works:
Journal Article: Tax Competition and Economic Geography (2003) Downloads
Working Paper: Tax Competition and Economic Geography (2000) Downloads
Working Paper: Tax Competition and Economic Geography (1999) Downloads
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