Tax reform, delocation and heterogeneous firms

Richard Baldwin, Toshihiro Okubo

NBER Working Paper No. 15109
Issued in June 2009
NBER Program(s):   ITI

The standard international tax model is extended to allow for heterogeneous firms when agglomeration forces are important thus allowing us to study the relocation effects of taxes that vary according to firm size. We show that allowing for heterogeneity permits a given tax scheme to have an endogenously different effect on the location decision of small and big firms, with the biggest firms being endogenously more likely to relocate in reaction to high taxes. We show that a reform which flattens the tax-firm-size profile can raise tax revenue without inducing any relocation.

(224 K)

Published: Richard Baldwin & Toshihiro Okubo, 2009. "Tax Reform, Delocation, and Heterogeneous Firms," Scandinavian Journal of Economics, Blackwell Publishing, vol. 111(4), pages 741-764, December.

This paper is available as PDF (224 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX