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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26600
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| Title: | | The role of mobility in tax and subsidy competition  |
| Authors: | | Haupt, Alexander Krieger, Tim |
| Issue Date: | | 2009 |
| Series/Report no.: | | CESifo working paper 2555 |
| Abstract: | | In this paper, we analyse the role of mobility in tax and subsidy competition. Our primary result is that increasing relocation mobility of firms leads to increasing net tax revenues under fairly weak conditions. While enhanced relocation mobility intensifies tax competition, it weakens subsidy competition. The resulting fall in the governments' subsidy payments over-compensates the decline in tax revenues, leading to a rise in net tax revenues. We derive this conclusion in a model in which two governments are first engaged in subsidy competition and thereafter in tax competition, and firms locate and potentially relocate in response to the two political choices. |
| Subjects: | | Tax competition subsidy competition capital and firm mobility foreign direct investment |
| JEL: | | H71 H87 F21 H25 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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