Tax reform, delocation, and heterogeneous firms

Richard Baldwin, Toshihiro Okubo

Research output: Contribution to journalArticle

33 Citations (Scopus)

Abstract

The standard international tax model is extended to allow for heterogeneous firms when agglomeration forces are important, enabling us to study the relocation effects of taxes that vary according to firm size. We show that allowing for heterogeneity permits a given tax scheme to have an endogenously different effect on the location decision of small and big firms, with the biggest firms being endogenously more likely to relocate in reaction to high taxes. We show that a reform that flattens the tax-firm-size profile can raise tax revenue without inducing any relocation.

Original languageEnglish
Pages (from-to)741-764
Number of pages24
JournalScandinavian Journal of Economics
Volume111
Issue number4
DOIs
Publication statusPublished - 2009 Dec
Externally publishedYes

Fingerprint

Tax
Tax reform
Heterogeneous firms
Firm size
Relocation
International standards
Tax revenues
Location decision
Agglomeration

Keywords

  • Agglomeration forces
  • International tax competition
  • Zimmerman hypothesis

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Tax reform, delocation, and heterogeneous firms. / Baldwin, Richard; Okubo, Toshihiro.

In: Scandinavian Journal of Economics, Vol. 111, No. 4, 12.2009, p. 741-764.

Research output: Contribution to journalArticle

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