Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/76497 
Year of Publication: 
2004
Series/Report no.: 
CESifo Working Paper No. 1140
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Is tax competition good for economic growth? The paper addresses this question by means of a simple model of economic growth in which a wasteful Leviathan state sets taxes and provides productive input. Wasteful behaviour is restricted by the voter, who reduces political support if her income is reduced. The intensity of tax competition is modelled via variation of a parameter measuring the mobility of the tax base. It is shown that the effects of increased mobility of the tax base on economic growth are ambiguous and that the elasticity of intertemporal substitution, which in this model equals the rate of intratemporal substitution between the government's own consumption and its political support, is a decisive variable in this context.
Document Type: 
Working Paper
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