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Title:Tax-Competition with Involuntary Unemployment PDF Logo
Authors:Eichner, Thomas
Upmann, Thorsten
Issue Date:2010
Series/Report no.:CESifo working paper Public Finance 3048
Abstract:In the present paper we extend the classical tax-competition framework of Zodrow and Mieszkowski (1986) by modelling involuntary unemployment and by allowing for labour taxation as a second source of public funds. For a large class of production functions (including CES), it turns out that tax competition is characterized by underprovision of public goods, and by positive taxes on both labour and capital. We thus conclude that the results of Zodrow and Mieszkowski survive some important and substantial modifications of the framework, and are thus more general than recently suggested elsewhere.
Subjects:tax competition
capital and labour taxation
involuntary unemployment
efficient bargains
JEL:H21
H71
H72
J51
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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