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Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/116571
Tax competition with heterogeneous capital mobility
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In this paper, we look at corporate fiscal policies set by two competing regions in an environment where firms are heterogonous regarding to their mobility costs. We show that if regions are allow to tax domestic and foreign capital at different rates, they will offer a preferential treatment to foreign firms, even if mobility costs are symmetrically distributed across regions. Preventing such type of preferential treatment raises revenues for both regions, unless there exist a high density of firms with low moving costs. Because preferential tax treatment promotes firms movement for fiscal raisons, such tax regime always generates more social loss due to unnecessary delocalization. We also investigate the effect of heterogeneity among regions.
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MONGRAIN, Steeve and WILSON, John D. Tax competition with heterogeneous capital mobility. IEB Working Paper 2011/25. [consulted: 10 of June of 2026]. Available at: https://hdl.handle.net/2445/116571