Tax competition, location and horizontal foreign direct investment

Behrens, Kristian; Picard, Pierre M.

Reference : Tax competition, location and horizontal foreign direct investment


	Document type :	E-prints/Working papers : Already available on another site
	Discipline(s) :	Business & economic sciences : International economics
	To cite this reference:	http://hdl.handle.net/10993/12187

Title :	Tax competition, location and horizontal foreign direct investment
Language :	English
Author, co-author :	Behrens, Kristian [Université du Québec, Montréal]
	Picard, Pierre M. [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Publication date :	21-Dec-2005
Publisher :	MIT Press
Peer reviewed :	Yes (verified by ORBi^lu)
ISSN :	1542-4766
Keywords :	[en] capital tax competition ; international trade ; multi-plant location problem ; foreign direct investment ; imperfect competition
Abstract :	[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.
Target :	Researchers ; Professionals ; Students
Permalink :	http://hdl.handle.net/10993/12187
Other URL :	http://wwwfr.uni.lu/content/download/35481/427114/file/2011-02%20-%20Transportation,%20freight%20rates,%20and%20economic%20geography.pdf
source URL :	https://www.google.lu/webhp?sourceid=chrome-instant&rlz=1C1VFKB_enLU679LU679&ion=1&espv=2&ie=UTF-8#q=Tax+competition%2C+location+and+horizontal+foreign+direct+investment

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