Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/75683
Authors: 
Kind, Hans Jarle
Midelfart, Helene
Schjelderup, Guttorm
Year of Publication: 
2000
Series/Report no.: 
CESifo Working Paper 252
Abstract: 
This paper uses a new economic geography model to analyze tax competition betweeen two countries trying to attract internationally mobile capital. Each government may levy a source tax on capit al and a lump sum tax on fixed labor. If industry is concentrated in one of the countries, the analysis finds that the host country will gain from setting its source tax on capital above that of the other country. In particular, the host may increase its welfare per capita by setting a positive source tax on capital and capture the positive externality that arise in the agglomeration. If industry is not concentrated, however, both countries will subsidize capital.
Document Type: 
Working Paper

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