Tax Competition with Heterogeneous Firms

Spatial Competition with Heterogeneous Firms

I model endogenous horizontal and vertical product differentiation with arbitrarily many heterogeneous firms. Firms are asymmetric in that they differ in their marginal costs. I prove that under an equilibrium refinement, all economically relevant firm outcomes are uniquely determined across all strict subgame perfect Nash equilibria. There are two central results. First, a firm’s price, market...

Tax Competition with and without Tax Discrimination against Domestic Firms

Multinational Firms Mitigate Tax Competition

An increase in the taxation of foreign affi liates reduces domestic investment, as has recently been empirically shown in Becker and Riedel (2012). This paper investigates the implication of this finding for tax competition. It is shown that an increase in the number of multinational firms (in contrast to purely national firms) may actually mitigate tax competition — counter to the popular opin...

Tax Competition with Heterogeneous Capital Mobility∗

∗We are grateful to IEB for its financial support. We would like to thank May Elsayyad, Leonzio Rizzo, and Tanguy van Ypersele, as well as participants at the 2011 Journée Louis André Gérard Varet, the IEB IV Workshop on Fiscal Federalism, the GREQAM seminar, the 2013 Southern Economic Association Meetings, and a seminar at Florida International University, for useful comments on an earlier ver...

Tax Competition in a Simple Model with Heterogeneous Firms: How Larger Markets Reduce Profit Taxes

An important puzzle in corporate taxation is that effective tax rates have fallen significantly while tax revenue has simultaneously risen in most countries. Moreover, the gross profitability of firms seems to be lower in high-tax countries, even though standard models of international investment would yield the opposite conclusion. We offer an explanation for these stylized facts by setting up...