We provide evidence indicating that countries with well-developed social security systems do not necessarily face a trade-off between social spending and competitiveness. On average, countries that spend a lot on social needs score well in the competitiveness league. We investigate the...

Eastern enlargement of the EU promises gains, but also imposes fiscal costs on incumbent countries. A sensitive issue concerns immigration, jobs and wages. We address these issues in a general equilibrium framework, both analytically and through numerical simulations. Analytical results identify...

In a two-country reciprocal dumping model, with one country unionized, we analyze how wage setting and firm location are influenced by trade liberalization. We show that trade liberalization can induce FDI, which is at odds with conventional theoretical wisdom and cannot happen in a...

This paper considers the distribution of output and productive factors among members of a fully integrated economy (FIE). We demonstrate that each member’s shares of total output and of total factors will be equal. This implies that growth in shares is random. If output andfactor shares evolve...

The European Union has recently proposed sectoral tax differentiation as a policy to fight unemployment. The member countries are allowed to reduce the VAT rates on goods and services that are particularly labor intensive and price elastic. The paper provides a theoretical analysis of the...

The paper argues that economic integration causes problems for the labor market of high-wage countries due to cross-border labor mobility and the accompanying increase in labor supply. Empirical evidence is provided from an analysis of regional labor market effects of German re-unification. In...

This paper analyses the development of the ratio of corporate taxes to wage taxes using a simple political economy model with internationally mobile and immobile firms. Among other results, our model predicts that countries reduce their corporate tax rate, relative to the wage tax, either when...

Multinational firms are known to shift profits and countries are known to compete over shifty profits. Two major principles for corporate taxation are Separate Accounting (SA) and Formula Apportionment (FA). These two principles have very different qualities when it comes to preventing profit...