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

Author(s): Richard Baldwin and Toshihiro Okubo

Publication Date: May 2008

Keyword(s): agglomeration, heterogeneous firms and tax reform

Programme Area(s): International Trade and Regional Economics

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.

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Bibliographic Reference

Baldwin, R and Okubo, T. 2008. 'Tax Reform, Delocation and Heterogeneous Firms: Base Widening and Rate Lowering Reforms'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6843