Tax reform, delocation and heterogeneous firms
Richard Baldwin () and
Toshihiro Okubo ()
No 15109, NBER Working Papers from National Bureau of Economic Research, Inc
The standard international tax model is extended to allow for heterogeneous firms when agglomeration forces are important thus allowing us to study the relocation effects of taxes that vary according to firm size. We show that allowing for heterogeneity permits a given tax scheme to have an endogenously different effect on the location decision of small and big firms, with the biggest firms being endogenously more likely to relocate in reaction to high taxes. We show that a reform which flattens the tax-firm-size profile can raise tax revenue without inducing any relocation.
JEL-codes: H32 H73 R12 (search for similar items in EconPapers)
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Published as Richard Baldwin & Toshihiro Okubo, 2009. "Tax Reform, Delocation, and Heterogeneous Firms," Scandinavian Journal of Economics, Blackwell Publishing, vol. 111(4), pages 741-764, December.
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