Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104260
Authors: 
Haufler, Andreas
Mittermaier, Ferdinand
Year of Publication: 
2008
Series/Report no.: 
Munich Discussion Paper 2008-10
Abstract: 
This paper analyses tax competition between a unionised and a non-unionised country for the location of an outside firm. We show that unionisation offers an extra incentive for the government to attract a foreign competitor to a concentrated domestic market, in order to affect the behaviour of the domestic union. This results in the unionised country's government offering a tax discount (or a subsidy premium) to the outside firm in excess of what is needed to compensate the investor for the higher union wage. In equilibrium, therefore, the unionised country can attract the outside firm even if it has other location disadvantages, such as a smaller home market.
Subjects: 
tax competition
trade unions
foreign direct investment
JEL: 
H25
H73
J58
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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