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Dynamic tax competition and public-sector modernisation

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  • Becker, Daniel Thomas

Abstract

This paper addresses the question whether increased mobility of capital enhances public-sector modernisation. Public-sector modernisation is modelled as the accumulation of knowledge (or another accumulated production factor) that serves as an input in the government's production of a consumption good. The public-sector provides a direct transfer to households. The tax competition model in the background is a dynamic model in which capital flight induced by taxation is a process that takes time. The speed with which firms can relocate capital to other jurisdictions is taken as a measure of the degree of capital mobility. The main result of the paper is a contradiction of the idea that the competitive pressure caused by increased capital mobility enhances public sector modernisation.

Suggested Citation

  • Becker, Daniel Thomas, 2008. "Dynamic tax competition and public-sector modernisation," Thuenen-Series of Applied Economic Theory 56, University of Rostock, Institute of Economics.
    • Handle: RePEc:zbw:roswps:56
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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