Fiscal Competition, Capital-Skill Complementarity, and the Composition of Public Spending

Rainald Borck

No 504, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Following Keen and Marchand (1997), the paper analyses the effect of fiscal competition on the composition of public spending in a model where capital and skilled workers are mobile while low skilled workers are immobile. Taxes are levied on capital and labour. Each group of workers benefits from a different kind of public good. Mobility of skilled workers provides an incentive for jurisdictions to spend 'too much' on public goods benefitting the skilled and 'too little' on those benefitting low skilled workers. In the case of capital-skill complementarity, this incentive is strengthened. The analysis is then extended to allow for mobility of unskilled labour.

Keywords: Tax competition; Capital skill complementarity; Public spending (search for similar items in EconPapers)
JEL-codes: H77 J24 J61 (search for similar items in EconPapers)
Pages: 14 p.
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Fiscal Competition, Capital-Skill Complementarity, and the Composition of Public Spending (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp504

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