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Title:Tax competition, elastic labor supply, and growth PDF Logo
Authors:Hange, Ulrich
Issue Date:2008
Series/Report no.:CESifo working paper 2338
Abstract:In this paper we investigate the effects of tax competition in a simple endogenous growth model with elastic labor supply. Our analysis focuses on two issues. First, we show that all taxes, i.e. on capital, labor, and consumption, are harmful for growth. Second, we derive the optimal tax policy. A regional government chooses an inefficiently low tax rate on mobile capital in the presence of tax competition. In contrast, the tax rates on labor income and consumption are always set in order not to distort the consumption-leisure choice.
Subjects:Tax competition
endogenous growth
elastic labor
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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