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
© 2025. Kent A. Clark Center for Global Markets.
8%
0%
4%
22%
36%
30%
0%
Responses weighted by each expert's confidence
© 2025. Kent A. Clark Center for Global Markets.
4%
27%
36%
33%
0%
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
© 2025. Kent A. Clark Center for Global Markets.
8%
0%
28%
38%
20%
6%
0%
Responses weighted by each expert's confidence
© 2025. Kent A. Clark Center for Global Markets.
34%
43%
17%
6%
0%
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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 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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 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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 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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 Botond Kőszegi |
Central European University | Bio/Vote History | ||
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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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 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 |
|---|---|---|---|---|
|
Philippe Aghion |
Harvard | Did Not Answer | Bio/Vote History | |
|
|
||||
|
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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||||
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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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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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||||
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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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||||
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
|
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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Elena Carletti |
Bocconi | Bio/Vote History | ||
|
this may lead to too lax competition
|
||||
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
|
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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||||
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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|
||||
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Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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||||
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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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||||
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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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||||
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Francesco Giavazzi |
Bocconi | Did Not Answer | Bio/Vote History | |
|
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||||
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
|
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 | ||
|
|
||||
|
Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
|
Competition may i setting taxes may lower overall taxations , helping reduce the size of the government
|
||||
|
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 | ||
|
Competitions between cities means that firms collect the rent.
|
||||
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Henrik Kleven |
Princeton | Bio/Vote History | ||
|
|
||||
|
Botond Kőszegi |
Central European University | Bio/Vote History | ||
|
|
||||
|
Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
|
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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Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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||||
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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.
|
||||
|
Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
|
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||||
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Torsten Persson |
Stockholm University | Bio/Vote History | ||
|
Tax compeittion may easily leave all countries worse off (no inflows and lower revenue) unless initial taxes are much too high.
|
||||
|
Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
|
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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||||
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
|
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||||
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Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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||||
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
|
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||||
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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 | ||
|
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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||||
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
|
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 | ||
|
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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||||
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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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