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Tax reform, delocation and heterogeneous firms: Base widening and rate lowering rule

Richard Baldwin () and Toshihiro Okubo ()

No 222, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: We model international tax competition allowing for agglomeration forces and heterogeneous firms. This provides a new perspective since a tax schedules have different effects on the international relocation decision of small and large firms (large firms are endogenously more sensitive to tax competition) and these decisions affect industry productivity in addition to the usual effects. The model allows us to study rate-lowering base-widening reforms. We show it is generally possible to design such a reforms that raises revenue without losing firms.

Keywords: Tax reform; Heterogeneous firms; Agglomeration forces (search for similar items in EconPapers)
JEL-codes: H32 P16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2005-10, Revised 2008-05
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https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp222.pdf Revised version, 2008 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:kob:dpaper:222

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