Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104227
Authors: 
Haufler, Andreas
Wooton, Ian
Year of Publication: 
2007
Series/Report no.: 
Munich Discussion Paper 2007-13
Abstract: 
We set up a model of generalised oligopoly where two countries of different size compete for an exogenous, but variable, number of identical firms. The model combines a desire by national governments to attract internationally mobile firms with the existence of location rents that arise even in a symmetric equilibrium where firms are dispersed. As economic integration proceeds, equilibrium taxes decline, switching from positive to negative levels, and then rise as trade costs fall even further. A range of trade costs is identified where economic integration raises the welfare of the small country, but lowers welfare in the large country.
Subjects: 
tax and subsidy competition
oligopolistic markets
JEL: 
H25
H73
F15
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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