Competition for Firms in an Oligopolistic Industry: Do Firms or Countries Have to Pay?

We set up a model of generalised oligopoly where two countries of different size compete for an exogenous, but variable, number of identical firms. The model combines a desire by national governments to attract internationally mobile firms with the existence of location rents that arise even in a symmetric equilibrium where firms are dispersed. As economic integration proceeds, equilibrium taxes decline, switching from positive to negative levels, and then rise as trade costs fall even further. A range of trade costs is identified where economic integration raises the welfare of the small country, but lowers welfare in the large country

Fiscal competition for FDI when bidding is costly

We introduce bidding costs into a standard model of tax/subsidy competition between two potential host countries to attract the plant of a monopoly firm. Such a bidding cost, even if it is infinitesimal, qualitatively alters the resulting equilibrium. At most one country offers fiscal inducements to the firm, and this attenuates the familiar "race to the bottom" in corporate taxes. In general, the successful host country benefits from the resulting absence of active tax/subsidy competition, at the expense of the owners of the firm in the rest of the world

Regional Tax Coordination and Foreign Direct Investment

The paper analyzes the effects of a regionally coordinated profit tax in a model with three active countries, one of which is not part of the union, and a globally mobile firm. We show that regional tax coordination can lead to two types of welfare gains. First, for investments that would take place in the region in the absence of coordination, this measure can transfer location rents from the firm to the union. Second, by internalizing all of the union’s benefits from foreign direct investment, a coordinated policy attracts more investment than when member states act in isolation. Consequently, tax levels may rise or fall under regional coordination.tax competition, regional coordination, international investment

Competition for Firms in an Oligopolistic Industry: Do Firms or Countries Have to Pay?

We set up a model of generalised oligopoly where two countries of different size compete for an exogenous, but variable, number of identical firms. The model combines a desire by national governments to attract internationally mobile firms with the existence of location rents that arise even in a symmetric equilibrium where firms are dispersed. As economic integration proceeds, equilibrium taxes decline, switching from positive to negative levels, and then rise as trade costs fall even further. A range of trade costs is identified where economic integration raises the welfare of the small country, but lowers welfare in the large country.tax and subsidy competition; oligopolistic markets

Regional Tax Coordination and Foreign Direct Investment

This paper analyses the effects of a regionally coordinated corporate income tax in a model with three active countries, one of which is not part of the union, and a globally mobile firm. We show that regional tax coordination can lead to two types of welfare gain. First, for investments that would take place in the union in the absence of coordination, a coordinated tax increase can transfer location rents from the firm to the union. Second, by internalising all of the union’s benefits from foreign direct investment, a coordinated tax reduction can attract more welfare-enhancing investment than when member states act in isolation. Depending on which motive dominates, tax levels may thus rise or fall under regional coordination.tax competition; regional coordination; foreign direct investment

Market structure and market access

The authors examine an issue at the nexus of domestic competition policy and international trade, the interaction between goods trade and market power in domestic trade and distribution sectors. Theory suggests a set of linkages between service-sector competition and goods trade supported by econometrics involving imports of 22 OECD countries compared with 69 exporters. Competition in services affects the volume of goods trade. Additionally, because of interaction between tariffs and competition, the market structure of the domestic service sector becomes increasingly important as tariffs are reduced. Empirically service competition apparently matters most for exporters in smaller, poorer countries. The results also suggest that while negotiated agreements leading to cross-border services liberalization may boost goods trade as well, they may also lead to a fall in goods trade when such liberalization involves foreign direct investment leading to increased service sector concentration.Markets and Market Access,Economic Theory&Research,Free Trade,Access to Markets,Trade Policy

Market structure and market access

We examine an issue at the nexus of domestic competition policy and international trade, the interaction between goods trade and market power in domestic trade and distribution sectors. Theory suggests a set of linkages between service-sector competition and goods trade supported by econometrics involving imports of 22 OECD countries vis-´a-vis 69 exporters. Competition in services affects the volume of goods trade. Additionally, because of interaction between tariffs and competition, the market structure of the domestic service sector becomes increasingly important as tariffs are reduced. Empirically service competition apparently matters most for exporters in smaller, poorer countries. Our results also suggest that while negotiated agreements leading to crossborder services liberalization may boost goods trade as well, they may also lead to a fall in goods trade when such liberalization involves FDI leading to increased service sector concentration.distribution sector competition; market access; services; trade liberalization; GATS

The transatlantic trade and investment partnership (TTIP) : the devil will be in the detail

The European Union and the United States of America are currently engaged in negotiations on a comprehensive bilateral trade agreement, known as the Trans-Atlantic Trade and Investment Partnership (TTIP). According to the European Commission (2015), the resulting bilateral agreement should “help people and businesses large and small, by: opening up the US to EU firms; helping cut red tape that firms face when exporting; setting new rules to make it easier and fairer to export, import and invest overseas.” Despite these ideals, the proposed agreement and the negotiations to achieve it have been subject to criticism by many people and organisations across Europe. This article attempts to shed some light on the issues and the potential benefits (or otherwise) of TTIP with a particular focus on Scottish interests