Seminar in International Economics im Wintersemester 2012/13

Das FIW bietet regelmäßig Vorlesungen in Form eines Seminars in "International Economics" an.

Ort: wiiw Wiener Institut für Internationale Wirtschaftsvergleiche, Rahlgasse 3, 1060 Wien

nächster Termin:

Donnerstag, 6. Juni 2013, 16:00 Uhr

wiiw, Rahlgasse 3, 1060 Wien, lecture hall (entrance from the ground floor)

"FDI, Trade Costs and Regional Asymmetries"

Ian Wooton (with Julia Darby and Ben Ferrett)
University of Strathclyde


 

Abstract

We set up a trade model where three countries compete for an exogenous number of firms. Our innovation lies in the geography of the model. Of the three countries, one is the hub through which all trade takes place. We establish the initial allocation of industry across the countries in the absence of tax competition. We then examine the implications for corporate tax levels when the countries compete with each other to attract firms and determine the resulting location of economic activity.
We find that, even when all countries are the same size, the ‘centrality’ of the hub gives it an advantage in tax setting, such that its equilibrium tax rate can be larger than that of the spokes and yet it still attracts a disproportionate share of industry. Thus geographic advantage in tax competition has a second dimension, centrality in addition to size.