Question A:
Giving tax incentives to specific firms to locate operations in a country typically generates domestic benefits that outweigh the costs to the country providing the incentives.
Responses
Responses weighted by each expert's confidence
Question B:
Europe as a whole benefits when European cities or countries compete with each other by giving tax incentives to firms to locate operations in their jurisdictions.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 Philippe Aghion |
Harvard | Did Not Answer | Bio/Vote History | |
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 Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Difficult to answer such a general question - more information about the particular circumstances is required.
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 Pol Antras |
Harvard | Bio/Vote History | ||
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There is evidence of positive effects of attracting firms (esp. via backward linkages), but hard to compare estimated gains to tax breaks
-see background information here |
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 Richard Baldwin |
The Graduate Institute Geneva | Bio/Vote History | ||
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 Timothy J. Besley |
LSE | Bio/Vote History | ||
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It rides on whether the tax incentives are targeted towards industries with high spillovers.
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 Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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it depends on the demand elasticity. There are cases where it is greater than one, but cases where it is less. ``typically'' is too strong
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 Nicholas Bloom |
Stanford | Bio/Vote History | ||
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Providing incentives to firms is highly risky in terms of corruption and distortions of government incentives.
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 Richard William Blundell |
University College London | Bio/Vote History | ||
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Apart from encouraging some initial start-ups in a field, firm specific subsidies very likely distort production and reduce overall income.
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 Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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Even in distressed areas this kind of policy gets poor results.
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 Elena Carletti |
Bocconi | Bio/Vote History | ||
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this seems to be proved by countries like Ireland or Luxembourg where fiscal advantages to firms seem to be beneficial
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 Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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It is a matter of self-interest for the region itself but there may be circumstances where the region's interests are not well represented.
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 Paul De Grauwe |
LSE | Bio/Vote History | ||
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 Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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 Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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 Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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This is a beggar-thy-neighbour policy, so it would be correct only provided the other countries do not reciprocate
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 Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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 Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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At least in expectation the benefits should be positive if the deal is offered by a central authority.
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 Luis Garicano |
LSE | Did Not Answer | Bio/Vote History | |
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 Francesco Giavazzi |
Bocconi | Did Not Answer | Bio/Vote History | |
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 Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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In many cases incentives go to firms that would choose that location in the absence of the incentives, so the costs outweigh the benefits.
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 Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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 Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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very much depends on the specific of the tax incentives; they may well be grabbed by rent seeking firms
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 Martin Hellwig |
Max Planck Institute for Research on Collective Goods | Did Not Answer | Bio/Vote History | |
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 Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Competition between locations means that firm collects the rent.
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 Henrik Kleven |
Princeton | Bio/Vote History | ||
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Cannot be answered without information on exact tax parameters & conclusive estimates of firm location elasticities (which aren't available)
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 Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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While benefits are consummated locally, negative externalities and allocative distortions are largely outside the country.
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 Per Krusell |
Stockholm University | Bio/Vote History | ||
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this is good policy only if the government is able to select the right companies - which it is typically not
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 Botond Kőszegi |
Central European University | Bio/Vote History | ||
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 Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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 Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Can be local benefits but unclear politicians offer tax incentives only when net beneficial locally. Governmental agency problems get in way
-see background information here |
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 Costas Meghir |
Yale | Bio/Vote History | ||
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 Peter Neary |
Oxford | Bio/Vote History | ||
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Providing information and helping foreign firms cope with bureaucracy are desirable; direct grants are unlikely to match their full costs
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 Kevin O'Rourke |
Oxford | Bio/Vote History | ||
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It depends on the nature of the incentives and the nature of firms. Targeting sectors presumably better than targeting "specific firms".
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 Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Providing such incentives may simply induce other jurisdictions to angage in the same behavior, and so eventually benefit only firms.
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 Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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 Torsten Persson |
Stockholm University | Bio/Vote History | ||
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The question seems to suppose unilateral action, but a lack of foreign resoponse at is unrealistic.
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 Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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Whether it does or not depends on many other factors, such as infrastructure suitable for the firm's operations
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 Richard Portes |
London Business School | Bio/Vote History | ||
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Ireland is a positive example. But many emerging markets countries are counter examples.
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 Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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 Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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 Rafael Repullo |
CEMFI | Bio/Vote History | ||
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 Hélène Rey |
London Business School | Bio/Vote History | ||
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Luxembourg and Ireland are good examples...
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 Antoinette Schoar |
MIT | Bio/Vote History | ||
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 John Van Reenen |
LSE | Bio/Vote History | ||
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Most of benefits are typically appropriated by firms themselves. Best way to get FDI is to improve skills, rule of law, local public goods
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 John Vickers |
Oxford | Bio/Vote History | ||
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Risks of over-estimating value of inducing location and of 'overpaying' for it.
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 Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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distortionary effects on factor markets are rarely accounted for
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 Beatrice Weder di Mauro |
The Graduate Institute, Geneva | Bio/Vote History | ||
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 Karl Whelan |
University College Dublin | Bio/Vote History | ||
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This can be true but governments aren't always great at "picking winners." Some special local tax rates are probably just bad ideas.
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 Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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Ireland says it all.
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 Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Philippe Aghion |
Harvard | Did Not Answer | Bio/Vote History | |
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Small countries have an incentive to offer low rates since their fixed costs are smaller.
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Pol Antras |
Harvard | Bio/Vote History | ||
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Sometimes tax competition can lead to inefficiently low tax rates (a race to the bottom in taxes or a winner's curse in subsidies)
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Richard Baldwin |
The Graduate Institute Geneva | Bio/Vote History | ||
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Timothy J. Besley |
LSE | Bio/Vote History | ||
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I am not totally opposed to tax competition but there need to be "rules of the game" to prevent a race to the bottom.
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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well known case of tax competition driving rates to zero. Zero rates are not optimal.
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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This helps reduce capital taxes, but risks generating incentives for burearacy and even corruption in governments
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Richard William Blundell |
University College London | Bio/Vote History | ||
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Competition through local firm tax incentives may unnecessarily reduce the country's tax base and increase other less efficient taxes.
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Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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Tax competition cannot be welfare enhancing as long as it is distorted (e.g. due to profit shifting).
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Elena Carletti |
Bocconi | Bio/Vote History | ||
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this may lead to too lax competition
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Under transparent rules tax competition is positive, but this condition is often not met.
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Paul De Grauwe |
LSE | Bio/Vote History | ||
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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Competition should be based on infrastructure, services and human capital, not beggar thy neighbour policies
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Possibly not if competition is restricted to tax incentives, but more generally it may encourage
more business-friendly policies for all.
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Luis Garicano |
LSE | Did Not Answer | Bio/Vote History | |
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Francesco Giavazzi |
Bocconi | Did Not Answer | Bio/Vote History | |
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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European countries largely compete against each other for firm location, so gains in one country equal losses in another.
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Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Competition may i setting taxes may lower overall taxations , helping reduce the size of the government
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Martin Hellwig |
Max Planck Institute for Research on Collective Goods | Did Not Answer | Bio/Vote History | |
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Competitions between cities means that firms collect the rent.
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Henrik Kleven |
Princeton | Bio/Vote History | ||
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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Compare innovation and competition (pro) with rent seeking and allocative distortions (contra). For Europe, the "contra" argument dominates.
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Per Krusell |
Stockholm University | Bio/Vote History | ||
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if we think corporate taxes are too low this may be a good thing, but it is then better to just lower them across the board
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Botond Kőszegi |
Central European University | Bio/Vote History | ||
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Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Zero sum unless companies would otherwise leave EU. Inefficient but it can help when tax rates are too high due to political economy reasons
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Costas Meghir |
Yale | Bio/Vote History | ||
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Peter Neary |
Oxford | Bio/Vote History | ||
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Competition on services and in providing information is desirable; competition on subsidies and tax breaks risks a race to the bottom
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Kevin O'Rourke |
Oxford | Bio/Vote History | ||
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Depends on nature of incentives & on whether there is competition between EU & rest of world. There may be negative distributional effects
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Such competition may eventually only benefits the firms, not EU citizens as a whole.
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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Torsten Persson |
Stockholm University | Bio/Vote History | ||
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Tax compeittion may easily leave all countries worse off (no inflows and lower revenue) unless initial taxes are much too high.
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Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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The strongest will become stronger and the weakest weaker!
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Richard Portes |
London Business School | Bio/Vote History | ||
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If 'Europe' means anything, it should renounce tax competitiveness.
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Hélène Rey |
London Business School | Bio/Vote History | ||
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Among other negative effects, there are lost tax revenues which could finance public goods.
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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John Van Reenen |
LSE | Bio/Vote History | ||
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Sets up a race to the bottom in terms of taxation
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John Vickers |
Oxford | Bio/Vote History | ||
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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this favors large firms and creates size-dependent distortions
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Beatrice Weder di Mauro |
The Graduate Institute, Geneva | Bio/Vote History | ||
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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This kind of process drives down average corporate tax rates across the EU. There are probably better ways to cut taxes.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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Tax competition is a Nash game that stands to hurt every one. But, gIven high tax rates in Europe, tax competition keeps the lid on.
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Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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