We investigate how international trade and trade policy possibly affect the regional distribution of economic activities within a country involved in a process of economic integration. Our analysis reveals that the impact of decreasing international trade costs on the spatial distribution of...

We study the optimal combination of corporate tax rate and tax base in a model of a small open economy with heterogeneous firms. We show that it is optimal for the small country's government to effectively subsidize capital inputs by granting a tax allowance in excess of the true costs of...