Dynamic tax competition and public-sector modernisation

Daniel Becker

No 56, Thuenen-Series of Applied Economic Theory from University of Rostock, Institute of Economics

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.

Keywords: public-sector modernisation; dynamic tax competition; imperfect capital mobility (search for similar items in EconPapers)
JEL-codes: H11 H54 H77 O40 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:roswps:56

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