Our paper extends the capital tax competition literature by incorporating heterogeneous capital and agglomeration. Our model nests the standard tax competition model as well as the special case in which there is agglomeration but no firm/capital heterogeneity and the opposite case, firm...

Our paper extends the capital tax competition literature by incorporating heterogeneous capital and agglomeration. Our model nests the standard tax competition model as well as the special case in which there is agglomeration but no firm/capital heterogeneity and the opposite case, firm...

We develop a model in which states may choose to form coalitions to capture efficiency gains from policy coordination. Joining a coalition entails setting the policy variable to maximize the coalitions' aggregate payoff at a Nash equilibrium against nonmembers, and to commit to a transfer scheme...