Does tax competition increase disparity among jurisdictions?

Yutao Han (), Patrice Pieretti and Benteng Zou

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: This paper investigates whether a less-developed economy can catch up with a more developed one when they compete for foreign direct investments. The main message of the paper is that jurisdictional competition can enable the lagging country to catch up if capital mobility is sufficiently high and the productivity gap is not too large. Further, we show that size asymmetry reinforces (weakens) the productivity catch-up resulting from interjurisdictional competition when the lagging economy is small (large). Finally, we demonstrate that the development gap widens when capital becomes less mobile, which is at odds with previous findings

Keywords: interjurisdictional competition; productivity catch-up; size asymmetry (search for similar items in EconPapers)
JEL-codes: C72 H1 H73 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:15-07

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