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

Keywords

  • FDI
  • efficiency
  • geographical change
  • dynamic fiscal competition

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  • Research Output

    Does tax competition make mobile firms more footloose?

    Ferrett, B., Hoefele, A. & Wooton, I., 11 Feb 2019, In : Canadian Journal of Economics. 52, 1, p. 379-402 24 p.

    Research output: Contribution to journalArticle

  • 1 Citation (Scopus)

    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). http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11325