That some capital importing regions subsidize units of capital is inconsistent with the standard models of the capital tax competition literature. We maintain the assumption of capital homogeneity and relax the assumption of constant returns to scale. Among other things, we show that symmetric...

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...