Business, Management and Accounting
4 years ago

Tax competition drives countries to attract capital with strategic policies.

RePEc: Research Papers in Economics
Competing for Capital in a "Lumpy" World
Hans Jarle Kind, Karen Helene Midelfart Knarvik, Guttorm Schjelderup

Paper Summary

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The paper looks at how countries compete for international capital by using taxes. If one country has most of the industry, it can benefit by setting higher taxes on capital. This way, it can make more money and take advantage of having all the businesses in one place. But if industry is spread out, both countries will give tax breaks to attract capital.