Agglomeration Effects and Tax Competition between Heterogeneous Regions
We analyze tax competition on FDI between heterogenous regions by introducing the footloose capital into Ottaviano et al.(2002).We find that the optimal tax rate for the large region increases with its size, while for the small region, its optimal tax rate increases with its size if the manufactured goods are sufficiently differentiated or its size is not too small.When the trade cost is reduced, the optimal tax rates for the two regions may converge or diverge, depending on their market size difference and trade cost.In equilibrium, the large region receives a more-than-propotionate share of FDI, and this share increases with further reduction of the trade cost, i.e., a second magnification effect exists.Finally, a simple FDI and tax coordination shceme is proposed and its impacts on the spatial distribution of FDI and social welfare are evaluated.
FDI Agglomeration Tax competition Hetrogeneous regions
Xiwei Zhu Huasheng Song
the Center for Research of Private Economy and School of Economics,Zhejiang University,Hangzhou 310027,China
国内会议
杭州
英文
315-342
2012-11-23（万方平台首次上网日期，不代表论文的发表时间）