Title
Tax reform, delocation and heterogeneous firms:Base widening and rate lowering rule
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.
Richard E. BALDWIN
Graduate Institute, Geneva and CEPR
Toshihiro OKUBO
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501
Japan
Phone: (81) 78 803 7036
Fax: (81) 78 803 7059