Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89690
Authors: 
Darby, Julia
Ferrett, Ben
Wooton, Ian
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper 4469
Abstract: 
We set up a trade model where three countries compete for an exogenous number of firms. Our innovation lies in the geography of the model. Of the three countries, one is the hub through which all trade takes place. First, we establish the natural geography of the region, which is given by the equilibrium distribution of industrial activity in the absence of taxes or subsidies. We then examine the implications for corporate taxes when the countries compete with each other to attract firms. We find that, even when all countries are the same size, the centrality of the hub gives it an advantage in tax setting, such that its equilibrium tax can be larger than that of the spokes and yet it still attracts a disproportionate share of industry. Thus geographic advantage in tax competition has a second dimension, centrality in addition to size.
Subjects: 
corporate taxes
devolution
trade costs
JEL: 
F15
F23
H25
H73
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.