This paper analyzes measures that limit firms’ profit shifting activities in a model that incorporates heterogeneous firm productivity and monopolistic competition. Such measures, e.g. thin capitalization rules, have become increasingly widespread as governments have reacted to growing profit...

Common tax competition models suggest that welfare states will undercut each other's tax rate to attract taxpayers and keep welfare recipients at bay. This will lead to a zero-taxation outcome in the absence of migration costs or other barriers to migration. This paper develops a two-country...

Following recent court rulings, cross-border loss compensation for multinational firms will likely be introduced, at least in Europe. This paper analyzes the effects of introducing a coordinated cross-border tax relief in a setting where multinational firms choose the size of a risky investment...

Heterogeneous firm productivity seems to provide an argument for governments to pursue 'pick-the-winner' strategies by subsidizing highly productive firms more, or taxing them less, than their less productive counterparts. We appraise this argument by studying the optimal choice of effective tax...

An important puzzle in corporate taxation is that effective tax rates have fallen significantly while tax revenue has simultaneously risen in most countries. Moreover, the gross profitability of firms seems to be lower in high-tax countries, even though standard models of international...

Many people in the European Union fear that Eastern Enlargement leads to major job losses. More recently, these fears about job losses have extended to high skill labor and IT jobs. The paper examines with unique firm level data whether these fears are justified for the two neighboring countries...

We analyze a sequential game between two symmetric countries when firms can invest in a multinational structure that confers tax savings. Governments are able to commit to long-run tax discrimination policies before firms' decisions are made and before statutory capital tax rates are chosen...

This paper analyses tax competition between a unionised and a non-unionised country for the location of an outside firm. We show that unionisation offers an extra incentive for the government to attract a foreign competitor to a concentrated domestic market, in order to affect the behaviour of...

In an influential paper Mankiw, Romer, and Weil (1992) argue that the evidence on the international disparity in levels of per capita income and rates of growth is consistent with a standard Solow model, once it has been augmented to include human capital as an accumulable factor. In a study on...

This paper analyses capital tax competition between jurisdictions of different size when multinational firms can shift some fraction of their tax base between them. For the case of revenue maximizing governments, we show that introducing profit shifting will not generally increase downward...