<p class="MsoBodyText" style="text-justify: inter-ideograph; text-align: justify; line-height: normal; margin: 0in 34.2pt 0pt 0.5in;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">While tax competition of mobile capital has been explored in the literature, little attention has been paid to the effects on business incentives for global trading.<span style="mso-spacerun: yes;">&nbsp; </span>We show that tax competition creates negative fiscal externalities via

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... d production decisions of multinational companies, when the markets across countries are interrelated through intra-firm trade.<span style="mso-spacerun: yes;">&nbsp; </span>Pareto improvement may emerge once the governance of the interrelated markets is coordinated across different governments. </span></span></p>