FDI, Trade Costs and Regional Assymetries
Darby, Julia and Ferrett, Ben and Wooton, Ian (2013) FDI, Trade Costs and Regional Assymetries. Discussion paper. University of Strathclyde, Glasgow.
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Abstract
We set up a trade model where three countries compete for an exogenous number of firms. Our innovation lies in the geography of the model. Of the three countries, one is the hub through which all trade takes place. First, we establish the natural geography of the region, which is given by the equilibrium distribution of industrial activity in the absence of taxes or subsidies. We then examine the implications for corporate taxes when the countries compete with each other to attract firms. We find that, even when all countries are the same size, the centrality of the hub gives it an advantage in tax setting, such that its equilibrium tax can be larger than that of the spokes and yet it still attracts a disproportionate share of industry. Thus geographic advantage in tax competition has a second dimension, centrality in addition to size.
ORCID iDs
Darby, Julia ORCID: https://orcid.org/0000-0003-4425-7222, Ferrett, Ben and Wooton, Ian ORCID: https://orcid.org/0000-0001-5084-6379;-
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Item type: Monograph(Discussion paper) ID code: 68084 Dates: DateEvent4 November 2013PublishedNotes: Published as a paper within the Discussion Papers in Economics, No. 13-27 (2013) Subjects: Social Sciences > Economic Theory
Social Sciences > FinanceDepartment: Strathclyde Business School > Economics Depositing user: Pure Administrator Date deposited: 29 May 2019 08:58 Last modified: 31 Aug 2024 01:17 URI: https://strathprints.strath.ac.uk/id/eprint/68084