Competing for Capital when Labor is Heterogeneous
Jacques-François Thisse
(1, 2, 3, 4, 5)
,
Yasuhiro Sato
(6)
Résumé
This paper investigates the impacts of capital mobility and tax competition in a setting with imperfect matching between firms and workers. The small country attracts less firms than the large one but accommodates a share of the industry that exceeds its capital share--a reverse home market effect. This allows the small country to be more aggressive and to set a higher tax rate than the large one, thus implying that tax competition reduces international inequalities. However, the large country always attains a higher utility than does the small country. Our model thus encapsulates both the "importance of being small" and the "importance of being large". Last, tax harmonization benefits to the small country but is detrimental to the large one.
Domaines
Economies et financesFormat du dépôt | Notice |
---|---|
Type de dépôt | Article dans une revue |
Titre |
en
Competing for Capital when Labor is Heterogeneous
|
Résumé |
en
This paper investigates the impacts of capital mobility and tax competition in a setting with imperfect matching between firms and workers. The small country attracts less firms than the large one but accommodates a share of the industry that exceeds its capital share--a reverse home market effect. This allows the small country to be more aggressive and to set a higher tax rate than the large one, thus implying that tax competition reduces international inequalities. However, the large country always attains a higher utility than does the small country. Our model thus encapsulates both the "importance of being small" and the "importance of being large". Last, tax harmonization benefits to the small country but is detrimental to the large one.
|
Auteur(s) |
Jacques-François Thisse
1, 2, 3, 4, 5
, Yasuhiro Sato
6
1
PJSE -
Paris-Jourdan Sciences Economiques
( 1312 )
- 48 boulevard Jourdan 75014 Paris
- France
2
CEPR -
Center for Economic Policy Research
( 143559 )
- Royaume-Uni
3
CORE -
Center of Operation Research and Econometrics [Louvain]
( 48233 )
- 34, Voie du Roman Pays B-1348 Louvain-la-Neuve
- Belgique
4
Institute of Economic Research
( 216354 )
- Japon
5
PSE -
Paris School of Economics
( 301309 )
- 48 boulevard Jourdan 75014 Paris
- France
6
Graduate School of Environmental Studies [Nagoya]
( 66124 )
- Furo-cho, Chikusa-ku, Nagoya, Japan 464-8601
- Japon
|
Comité de lecture |
Oui
|
Vulgarisation |
Non
|
Langue du document |
Anglais
|
Nom de la revue |
|
Audience |
Non spécifiée
|
Date de publication |
2007-11
|
Volume |
51
|
Numéro |
8
|
Page/Identifiant |
2054-2079
|
Domaine(s) |
|
Mots-clés (JEL) |
|
Mots-clés |
en
Local labor markets, Capital mobility, Reverse home market effect, Fiscal competition
|
DOI | 10.1016/j.euroecorev.2007.01.007 |
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