Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74526
Authors: 
Haupt, Alexander
Krieger, Tim
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper Series, Wilfried-Guth-Stiftungsprofessur für Ordnungs- und Wettbewerbspolitik, Universität Freiburg 2013-02
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: 
H87
H71
F21
H25
Document Type: 
Working Paper

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