Labor Taxes, Productivity and Tax Competition

Satyajit Chatterjee (chatterjee.satyajit@gmail.com) and Amartya Lahiri

No 249, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: Why are taxes higher in Europe than in the US? We propose that it stems from lesser competition across jurisdictions within Europe. We embed self-interested governments and tax competition into a standard neoclassical growth model with public goods. While greater jurisdictional competition reduces taxes it also reduces societal investment in public capital and thus often ends up reducing total factor productivity. We show that despite this deleterious effect on the level of productive public capital, tax competition ends up raising per capita output and welfare. We show evidence to support both our baseline assumption of lesser mobility in Europe relative to the US as well as for our predictions on productivity differences between the two.

Date: 2019
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-ure
References: Add references at CitEc
Citations:

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2019/paper_249.pdf (application/pdf)

Related works:
Working Paper: Labor Taxes, Productivity and Tax Competition (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:249

Access Statistics for this paper

More papers in 2019 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann (chuichuiche@gmail.com).