Tax Reform, Delocation and Heterogeneous Firms: Base Widening and Rate Lowering Reforms

20 Pages Posted: 12 Jun 2008

See all articles by Richard E. Baldwin

Richard E. Baldwin

University of Geneva - Graduate Institute of International Studies (HEI); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Toshihiro Okubo

University of Geneva - Graduate Institute of International Studies (HEI)

Date Written: May 2008

Abstract

We model international tax competition allowing for agglomeration forces and heterogeneous firms. This provides a new perspective since a tax schedules have different effects on the international relocation decision of small and large firms (large firms are endogenously more sensitive to tax competition) and these decisions affect industry productivity in addition to the usual effects. The model allows us to study rate-lowering base-widening reforms. We show it is generally possible to design such a reforms that raises revenue without losing firms.

Keywords: agglomeration, heterogeneous firms, tax reform

JEL Classification: H32, P16

Suggested Citation

Baldwin, Richard E. and Okubo, Toshihiro, Tax Reform, Delocation and Heterogeneous Firms: Base Widening and Rate Lowering Reforms (May 2008). CEPR Discussion Paper No. DP6843, Available at SSRN: https://ssrn.com/abstract=1143205

Richard E. Baldwin (Contact Author)

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

PO Box 136
Geneva, CH-1211
Switzerland
+41 22 908 5933 (Phone)
+41 22 733 3049 (Fax)

HOME PAGE: http://www.hei.unige.ch/~baldwin/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Toshihiro Okubo

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

PO Box 136
Geneva, CH-1211
Switzerland
+41 22 908 5900 (Phone)

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