This paper demonstrates that under conditions of imperfect (oligopolistic) competition, a transition from separate accounting (SA) to formula apportionment (FA) does not eliminate the problem of profit shifting via transfer pricing. In particular, if affiliates of a multinational firm face...

It is observed in the real world that taxes matter for location decisions and that multinationals shift profits by transfer pricing. The US and Canada use Formula Apportionment (FA) to tax corporate income, and the EU is debating a switch from Separate Accounting (SA) to FA. This paper develops...

This paper establishes, in a very general setting, necessary and sufficient conditions for harmonization of economic policies to be welfare-improving. As an application, it is shown that under circumstances in which harmonization is known to be welfare-improving when taxes are levied on a...

Why do donor countries give foreign aid? The answers found in the literature are: (i) because donor countries care for recipient countries (e.g. altruism), and/or (ii) because there exist distortions that make the indirect gains from foreign aid (e.g. terms of trade effects) to be larger than...

This paper investigates the optimality of international income transfers in a two-country model in which each country engages in non-cooperative trade policy behaviour. It is shown that unconditional income transfers can never be optimal for the donor country, which not only suffers the loss of...

This paper studies the welfare implications of temporary foreign aid in the context of a simple two-country model of trade. In addition to its usual effects, a transfer of income in one period is assumed to influence the pattern of consumption of the recipient country in the following period....

This paper examines the effects of a transfer on the intertemporal terms of trade in the context of a simple two-country, two-period model. When intertemporal trade occurs because the two economies have different rates of time preference, a transfer entails an improvement in the terms of trade...

This paper examines the issue of optimal tariffs for a small economy that trades with a large economy. We define ‘small’ and ‘large’ in the sense that the world prices are determined solely by the large country and, therefore, the small country faces exogenously given world prices....

This paper introduces an index of tax optimality that measures the distance of some current tax structure from the optimal tax structure in the presence of public goods. In doing so, we derive a [0,1] number that reveals immediately how far the current tax configuration is from the optimal one...