The role of mobility in tax and subsidy competition

Arbeitspapier

In this paper, we analyse the role of mobility in tax and subsidy competition. Our primary result is that increasing ‘relocation’ mobility of firms leads to increasing ‘net’ tax revenues under fairly weak conditions. While enhanced relocation mobility intensifies tax competition, it weakens subsidy competition. The resulting fall in the governments’ subsidy payments over-compensates the decline in tax revenues, leading to a rise in net tax revenues. We derive this conclusion in a model in which two governments are first engaged in subsidy competition and thereafter in tax competition, and firms locate and potentially relocate in response to the two political choices.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Diskussionsbeiträge ; No. 2013-02

Classification and Topics

• Classification: Wirtschaft ; International Fiscal Issues; International Public Goods ; State and Local Taxation, Subsidies, and Revenue ; International Investment; Long-term Capital Movements ; Business Taxes and Subsidies including sales and value-added (VAT)
• Subject: tax competition ; subsidy competition ; capital and firm mobility ; foreign direct investment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Haupt, Alexander ; Krieger, Tim
• Event: Veröffentlichung
• (who): Albert-Ludwigs-Universität Freiburg, Wilfried-Guth-Stiftungsprofessur für Ordnungs- und Wettbewerbspolitik
• (where): Freiburg
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/74526
• Last update: 10.03.2025, 11:44 AM CET