The most fundamental proposition about growth and competition is that there is a tradeoff between static welfare and long-term growth. This paper reconsiders this basic proposition in an increasing product variety endogenous growth model with competitive markets for "old" innovative products and...

We analyse the welfare effects of a publicly imposed smoking ban in privately owned places like bars. In an economy where households have heterogenous (positive and negative) attitudes towards smoking bans, bars can use the smoking regime choice as a strategic variable. In doing so, bars may...

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...

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...

This article analyzes profit taxation according to the arm's length principle in a new model where heterogeneous firms sort into foreign outsourcing. We show that multinational firms are able to shift profits abroad even if they fully comply with the tax code. This is because, in equilibrium,...