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Tax Competition, Investment Irreversibility and the Provision of Public Goods

Author

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  • Michele Moretto

    (Department of Economics, University of Padua, Fondazione Eni Enrico Mattei and Centro Studi Levi-Cases)

  • Paolo Panteghini

    (Department of Economics and Management, University of Brescia, CESifo and AccounTax Lab)

  • Sergio Vergalli

    (Department of Economics, University of Brescia, and Fondazione Eni Enrico Mattei)

Abstract

This article studies the effects of tax competition on the provision of public goods under business risk and partial irreversibility of investment. As will be shown, the provision of public goods changes over time and also depends on the business cycle. In particular, under source-based taxation, public goods can be optimally provided during a downturn, in the short term. The converse is true during a recovery, when they are underprovided. In the long term however, tax competition does not affect capital accumulation and therefore, the provision of public goods.

Suggested Citation

  • Michele Moretto & Paolo Panteghini & Sergio Vergalli, 2013. "Tax Competition, Investment Irreversibility and the Provision of Public Goods," Working Papers 2013.66, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2013.66
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    References listed on IDEAS

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    Cited by:

    1. Giacomo Corneo & Sergio Vergalli, 2016. "Taxes, subsidies, regulation in dynamic models," Journal of Economics, Springer, vol. 119(2), pages 97-99, October.

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    More about this item

    Keywords

    Irreversibility; Risk; Short- and Long-Term Effects; Tax Competition;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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