Arbeitspapier

Competition for firms in an oligopolistic industry: do firms or countries have to pay?

We set up a model of generalised oligopoly where two countries of different size compete for an exogenous, but variable, number of identical firms. The model combines a desire by national governments to attract internationally mobile firms with the existence of location rents that arise even in a symmetric equilibrium where firms are dispersed. As economic integration proceeds, equilibrium taxes decline, switching from positive to negative levels, and then rise as trade costs fall even further. A range of trade costs is identified where economic integration raises the welfare of the small country, but lowers welfare in the large country.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 1976

Classification
Wirtschaft
Business Taxes and Subsidies including sales and value-added (VAT)
State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
Economic Integration
Multinational Firms; International Business
Subject
Direktinvestition
Steuerwettbewerb
Subvention
Standortwettbewerb
Oligopol
Wirtschaftsintegration
Wohlfahrtseffekt
Zwei-Länder-Modell
Theorie

Event
Geistige Schöpfung
(who)
Haufler, Andreas
Wooton, Ian
Event
Veröffentlichung
(who)
Center for Economic Studies and ifo Institute (CESifo)
(where)
Munich
(when)
2007

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Haufler, Andreas
  • Wooton, Ian
  • Center for Economic Studies and ifo Institute (CESifo)

Time of origin

  • 2007

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