#05-001 -- John Burbidge, Katherine Cuff and John Leach
Tax competition with heterogeneous firms (PDF)
Abstract
A model of tax competition in which firms earn rents is described. The size of these rents, coupled with the degree to which the firms are foreign-owned, determine the equilibrium tax rates. The existence of rents significantly alters some generally accepted results involving the possibility of a Pareto-improving common tax rate and the underprovision of publicly provided goods.