NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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.

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Document Object Identifier (DOI): 10.3386/w15109

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. citation courtesy of

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