Industrial agglomeration and capital taxation
Working paper
Permanent lenke
http://hdl.handle.net/11250/163018Utgivelsesdato
1998-07Metadata
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- Discussion papers (SAM) [649]
Sammendrag
Models with imperfect competition and intra-industry trade have become
widely accepted as appropriate frameworks within which to analyze the impact
of trade liberalization on industrial agglomeration. This paper makes one
modi…cation to the standard model; it allows for taxation of internationally
mobile capital. Making this change fundamentally alters the main lesson from
the tax literature that a country which faces perfectly internationally mobile
capital should not use source-based taxes on capital income. In particular, it
is shown that a country which hosts an agglomeration may actually increase
its welfare level per capita by levying a source-tax on capital income even if
capital can move costlessly between countries. It is thereby able to exploit the locational inertia created by agglomeration forces.
Utgiver
Norwegian School of Economics and Business Administration. Department of EconomicsSerie
Discussion paper1998:7