Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/26383 
Authors: 
Year of Publication: 
2008
Series/Report no.: 
CESifo Working Paper No. 2338
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
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
JEL: 
H21
H7
O23
Document Type: 
Working Paper
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