Skip to main content
Article thumbnail
Location of Repository

Profit taxation and the mode of foreign market entry

By Ronald B. Davies, Hartmut Egger and Peter Egger

Abstract

This paper studies the role of profit taxation for an international firm's decision upon how to penetrate a foreign market - through exports or through foreign direct investment (FDI) and local supply. We show that with harmonized taxes the international firm may choose FDI even though this has welfare costs from a global point of view. With tax competition, the host country can enforce exporting instead of FDI. This leads to a Nash equilibrium associated with higher world welfare than harmonized taxes. Thus, because of the effect on entry mode, tax competition provides heretofore unexplored benefits as compared to tax harmonization.

OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://economics.ca/cgi/xms?ja... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.