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Porter, Lynda
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Porter, Lynda
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Porter, Lynda
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Publication
Taxes and the location of production
2003-04, Porter, Lynda
In this paper I examine dynamic tax competition in the context of an endogenous market structure. I therefore consider the tensions between proximity versus concentration, taxation and firm mobility while I also consider strategic interaction by governments (to induce multinationality)
and asymmetric firms (for market share). The paper explores how strategic tax setting by rival governments may induce footloose firms to remain committed to initial location decisions, even when faced with adverse taxation regimes. In this instance, sunk costs resulting from the
operation of additional plants may confer a first mover advantage on governments that can prevent relocation of firms.
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Publication
Cost asymmetry and taxation : implications for multinational activity
2003-04, Porter, Lynda
This paper presents a novel approach to examining multinationality which features the associated proximity versus concentration trade-off. Borrowing an important tool that is widely used in the
strategic trade policy literature, I employ a third country model to examine the effects of a specific policy initiative and a firm-specific advantage on individual firm configuration. The main findings
are that taxes hurt the inefficient firm more, causing it to choose the exporting rather than the multinational method of serving markets. Consequently, multinational production is associated with cost-efficiency while the inefficient firm is more likely to be an exporter.