On tax competition, public goods provision and jurisdictions' size

Patrice Pieretti and Skerdilajda Zanaj

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: In this paper, we analyse competition among jurisdictions to attract firms through low taxes on capital and/or high level of public goods, which enhance firms' productivity. We assume that the competing jurisdictions are different in (population) size and that the mobility of capital is costly. We nd that for moderate mobility costs, small economies can attract foreign capital if they supply higher levels of public goods than larger jurisdictions, without being tax havens. If mobility costs are high, we recover the classical result that small jurisdictions are attractive to foreign capital if they engage in tax dumping. Finally, we show that there exists a subset of mobility costs for which the differentiation in public goods across jurisdictions is not able to relax tax competition.

JEL-codes: F13 F15 F22 H25 H73 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: On tax competition, public goods provision and jurisdictions' size (2011)
Working Paper: On tax competition, public goods provision and jurisdictions’ size (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:09-14

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