Tax Competition, Elastic Labor Supply, and Growth
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.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Arjan Lejour & Harrie Verbon, 1997. "Tax Competition and Redistribution in a Two-Country Endogenous-Growth Model," International Tax and Public Finance, Springer, vol. 4(4), pages 485-497, November.
- Wildasin, David E., 1989.
"Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy,"
Journal of Urban Economics,
Elsevier, vol. 25(2), pages 193-212, March.
- WILDASIN, David E., . "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," CORE Discussion Papers RP 831, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Uhlig, Harald & Yanagawa, Noriyuki, 1996. "Increasing the capital income tax may lead to faster growth," European Economic Review, Elsevier, vol. 40(8), pages 1521-1540, November.
- Brueckner, Jan K., 2006.
"Fiscal federalism and economic growth,"
Journal of Public Economics,
Elsevier, vol. 90(10-11), pages 2107-2120, November.
- Erkki Koskela & Ronnie Schöb, 2000.
"Optimal Factor Income Taxation in the Presence of Unemployment,"
CESifo Working Paper Series
279, CESifo Group Munich.
- Koskela, Erkki & Schob, Ronnie, 2002. " Optimal Factor Income Taxation in the Presence of Unemployment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(3), pages 387-404.
- Koskela, Erkki & Schöb, Ronnie, 2001. "Optimal Factor Income Taxation in the Presence of Unemployment," Discussion Papers 758, The Research Institute of the Finnish Economy.
- Stephen J. Turnovsky, 1999. "Fiscal Policy and Growth in a Small Open Economy with Elastic Labor Supply," Canadian Journal of Economics, Canadian Economics Association, vol. 32(5), pages 1191-1214, November.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
- Fuest, Clemens & Huber, Bernd, 2001.
"Labor and capital income taxation, fiscal competition, and the distribution of wealth,"
Journal of Public Economics,
Elsevier, vol. 79(1), pages 71-91, January.
- Fuest, Clemens & Huber, Bernd, 2001. "Labor and capital income taxation, fiscal competition, and the distribution of wealth," Munich Reprints in Economics 20294, University of Munich, Department of Economics.
- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
- Wellisch,Dietmar, 2000. "Theory of Public Finance in a Federal State," Cambridge Books, Cambridge University Press, number 9780521630351, November.
- Brueckner, Jan K, 1999. " Fiscal Federalism and Capital Accumulation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(2), pages 205-24.
- Michael Rauscher, 2005. "Economic Growth and Tax-Competing Leviathans," International Tax and Public Finance, Springer, vol. 12(4), pages 457-474, August.
- Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2338. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe)
If references are entirely missing, you can add them using this form.