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Is Capital Mobility Good for Public Good Provision?

Author

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  • Gregor Schwerhoff
  • Ottmar Edenhofer

Abstract

We set up a general model on capital mobility which contains many of the models in the literature as special cases. The race to the bottom results not from a capital flight effect, but rather from a kind of Laffer curve effect in public good provision. Selectively introducing simplifying assumptions allows reproducing other models and understanding how they bias results in favor or against capital mobility. We then show how the net effect of capital mobility can be positive or negative within the same model depending on the relative capital endowment.

Suggested Citation

  • Gregor Schwerhoff & Ottmar Edenhofer, 2013. "Is Capital Mobility Good for Public Good Provision?," CESifo Working Paper Series 4420, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4420
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp4420.pdf
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    References listed on IDEAS

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    Cited by:

    1. Habla, Wolfgang, 2016. "The Green Paradox and Interjurisdictional Competition across Space and Time," Working Papers in Economics 668, University of Gothenburg, Department of Economics.

    More about this item

    Keywords

    capital mobility; interjurisdictional competition; public good provision;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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