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Title:Fiscal competition in space and time: An endogenous-growth approach PDF Logo
Authors:Becker, Daniel Thomas
Rauscher, Michael
Issue Date:2007
Series/Report no.:Thünen-Series of Applied Economic Theory 74
Abstract:Is tax competition good for economic growth? The paper addresses this question by means of a simple model of endogenous growth. There are many small jurisdictions in a large federation and individual governments benevolently maximise the welfare of immobile residents. Investment is costly: Quadratic installation and de-installation costs limit the mobility of capital. The paper looks at optimal taxation and long-run growth. In particular, the effects of variations in the cost parameter on economic growth and taxation are considered. It is shown that balanced endogenous growth paths do not always exist, that, if they exist, the economic growth rate is positively related to the mobility of capital, that the impact of the mobility prameter on the tax rate is ambiguous and that the tax rate may go to zero even if mobility costs are strictly positive.
Subjects:Fiscal Federalism
Tax Competition
Endogenous Growth
JEL:H70
F21
O00
Document Type:Working Paper
Appears in Collections:Thünen Series of Applied Economic Theory, Universität Rostock

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