Does tax competition make mobile firms more footloose?

Ben Ferrett, Andreas Hoefele, Ian Wooton

Research output: Working paperDiscussion paper

Abstract

Existing analyses of fiscal competition for foreign direct investment (FDI) often assume a one-shot interaction between governments and the firm within a static
environment where the firm makes a permanent location choice. We examine a
two-period regional model where economic geography evolves, giving the firm
an incentive to relocate between periods. Government competition for FDI leads
the firm to make efficient location choices, with relocation "more likely" in the
presence of international tax competition, because the winning country’s bid
absorbs some of the firm’s relocation costs. With more time periods, tax
competition induces firm relocation sooner than in its absence.
Original languageEnglish
Place of PublicationLondon
Number of pages24
Publication statusPublished - 12 Jun 2016

Publication series

NameInternational Trade and Regional Economics
PublisherCentre for Economic Policy Research
No.1864-1464804347
ISSN (Electronic)0265-8003

Fingerprint

Tax competition
Relocation
Foreign direct investment
Location choice
Government
Costs
Economic geography
Interaction
International tax competition
Incentives
Fiscal competition

Keywords

  • FDI
  • efficiency
  • geographical change
  • dynamic fiscal competition

Cite this

Ferrett, B., Hoefele, A., & Wooton, I. (2016). Does tax competition make mobile firms more footloose? (International Trade and Regional Economics; No. 1864-1464804347). London.
Ferrett, Ben ; Hoefele, Andreas ; Wooton, Ian. / Does tax competition make mobile firms more footloose?. London, 2016. (International Trade and Regional Economics; 1864-1464804347).
@techreport{e46abb8ba87b4814ac5257b36f758d1c,
title = "Does tax competition make mobile firms more footloose?",
abstract = "Existing analyses of fiscal competition for foreign direct investment (FDI) often assume a one-shot interaction between governments and the firm within a staticenvironment where the firm makes a permanent location choice. We examine atwo-period regional model where economic geography evolves, giving the firman incentive to relocate between periods. Government competition for FDI leadsthe firm to make efficient location choices, with relocation {"}more likely{"} in thepresence of international tax competition, because the winning country’s bidabsorbs some of the firm’s relocation costs. With more time periods, taxcompetition induces firm relocation sooner than in its absence.",
keywords = "FDI, efficiency, geographical change, dynamic fiscal competition",
author = "Ben Ferrett and Andreas Hoefele and Ian Wooton",
year = "2016",
month = "6",
day = "12",
language = "English",
series = "International Trade and Regional Economics",
publisher = "Centre for Economic Policy Research",
number = "1864-1464804347",
type = "WorkingPaper",
institution = "Centre for Economic Policy Research",

}

Ferrett, B, Hoefele, A & Wooton, I 2016 'Does tax competition make mobile firms more footloose?' International Trade and Regional Economics, no. 1864-1464804347, London.

Does tax competition make mobile firms more footloose? / Ferrett, Ben; Hoefele, Andreas; Wooton, Ian.

London, 2016. (International Trade and Regional Economics; No. 1864-1464804347).

Research output: Working paperDiscussion paper

TY - UNPB

T1 - Does tax competition make mobile firms more footloose?

AU - Ferrett, Ben

AU - Hoefele, Andreas

AU - Wooton, Ian

PY - 2016/6/12

Y1 - 2016/6/12

N2 - Existing analyses of fiscal competition for foreign direct investment (FDI) often assume a one-shot interaction between governments and the firm within a staticenvironment where the firm makes a permanent location choice. We examine atwo-period regional model where economic geography evolves, giving the firman incentive to relocate between periods. Government competition for FDI leadsthe firm to make efficient location choices, with relocation "more likely" in thepresence of international tax competition, because the winning country’s bidabsorbs some of the firm’s relocation costs. With more time periods, taxcompetition induces firm relocation sooner than in its absence.

AB - Existing analyses of fiscal competition for foreign direct investment (FDI) often assume a one-shot interaction between governments and the firm within a staticenvironment where the firm makes a permanent location choice. We examine atwo-period regional model where economic geography evolves, giving the firman incentive to relocate between periods. Government competition for FDI leadsthe firm to make efficient location choices, with relocation "more likely" in thepresence of international tax competition, because the winning country’s bidabsorbs some of the firm’s relocation costs. With more time periods, taxcompetition induces firm relocation sooner than in its absence.

KW - FDI

KW - efficiency

KW - geographical change

KW - dynamic fiscal competition

UR - http://cepr.org/

M3 - Discussion paper

T3 - International Trade and Regional Economics

BT - Does tax competition make mobile firms more footloose?

CY - London

ER -

Ferrett B, Hoefele A, Wooton I. Does tax competition make mobile firms more footloose? London. 2016 Jun 12. (International Trade and Regional Economics; 1864-1464804347).