We construct a model of corporate tax competition in which governments also use public infrastructural investment to attract foreign direct investment, thus enhancing their tax bases. In doing so, we allow for inter-regional infrastructural externalities. Depending on the externality,...

We construct a model in which oligopolistic firms decide where to locate. Firms choose to locate either in a country where employment protection implies costly output adjustments or in one without adjustment costs. Using a two-period three-stage game with uncertainty it is demonstrated that...