Haufler, A. and Wooton, I. (2006) Regional tax coordination and foreign direct investment. European Economic Review, 50 (2). pp. 285-305. ISSN 0014-2921Full text not available in this repository. (Request a copy from the Strathclyde author)
This paper analyses the effects of a regionally coordinated profit tax or location subsidy in a model with three active countries, one of which is not part of the union, and a globally mobile firm. We show that regional coordination can lead to two types of welfare gain. First, for investments that would take place in the union in the absence of coordination, a coordinated tax increase can transfer location rents from the firm to the union. Second, by internalising all of the union's benefits from foreign direct investment, a coordinated tax reduction can attract more welfare-enhancing investment than when member states act in isolation. Depending on which motive dominates, tax levels may thus rise or fall under regional coordination.
|Keywords:||taxes, competition, foreign investment, economic growth, economics, Economic Theory, Finance, Economics and Econometrics|
|Subjects:||Social Sciences > Economic Theory|
|Department:||Strathclyde Business School > Economics|
|Depositing user:||Strathprints Administrator|
|Date Deposited:||23 Aug 2007|
|Last modified:||06 Jan 2017 03:50|