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Tax Competition for Heterogeneous Firms with Endogenous Entry

Ronald Davies () and Carsten Eckel ()

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: This paper models tax competition for mobile firms that aredifferentiated by their productivities Because taxes affect thedistribution of firms, they affect wages prices, and the number of firmsFrom the social planner’s perspective, optimal taxes efficientlydistribute income between private and public consumption and areharmonized, providing the optimal number of firms This is not a Nashequilibrium As is common in such models equilibrium taxes areinefficiently low Furthermore there is no pure strategy equilibrium withequal taxes resulting in too many firms This illustrates a newdistortion from tax competition and a new benefit from harmonization

Date: 2010
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Published in American Economic Journal: Economic Policy 1 2(2010): pp. 77-102

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Journal Article: Tax Competition for Heterogeneous Firms with Endogenous Entry (2010) Downloads
Working Paper: Tax Competition for Heterogeneous Firms with Endogenous Entry (2007) Downloads
Working Paper: Tax Competition for Heterogeneous Firms with Endogenous Entry (2007) Downloads
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