Reference : Tax competition, location and horizontal foreign direct investment
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Business & economic sciences : International economics
Tax competition, location and horizontal foreign direct investment
Behrens, Kristian [Université du Québec, Montréal]
Picard, Pierre M. mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
MIT Press
Yes (verified by ORBilu)
[en] capital tax competition ; international trade ; multi-plant location problem ; foreign direct investment ; imperfect competition
[en] We develop a model of capital tax competition in which imperfectly competitive firms choose both the number of plants they operate and their location. When compared to models with single-plant firms, the presence of multinationals reverses some standard results. First, instead of being subsidized, capital may actually be taxed in equilibrium, which shows that the presence of taxable ‘multinational rents’ relaxes tax competition. Second, even when firms are subsidized, their subsidyinclusive profits may be decreasing in subsidies, due to fiercer price competition by more multinationals. Third, multinationals may give rise to multiple equilibria in
the tax game, one of which can be a ‘subsidy trap’ characterized by many multinationals,
high subsidy levels, and low welfare.
Researchers ; Professionals ; Students,%20freight%20rates,%20and%20economic%20geography.pdf

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