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A Bargaining Model of Tax Competition

Seungjin Han () and John Leach working papers from Vancouver School of Economics

Abstract: This paper develops a model in which competing governments offer financial incentives to individual firms to induce the firms to locate within their jurisdictions. Equilibrium is described under three specifications of the supplementary taxes. There is no misallocation of capital under two of these specifications, and there might or might not be capital misallocation under the third. This result contrasts strongly with that of the standard tax competition model, which does not allow governments to treat firms individually. That model almost always finds that competition among governments leads to the misallocation of capital.

Pages: 0 pages
Date: 2005-12-02, Revised 2007-12-04
New Economics Papers: this item is included in nep-ure
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Journal Article: A bargaining model of tax competition (2008) Downloads
Working Paper: A Bargaining Model of Tax Competition (2007) Downloads
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