Tax Competition, Investment Irreversibility and the Provision of Public Goods

19 Pages Posted: 11 Jun 2013

See all articles by Michele Moretto

Michele Moretto

University of Padua, Dep of Economics and Management

Paolo M. Panteghini

University of Brescia; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Sergio Vergalli

University of Brescia - Department of Economics; Fondazione Eni Enrico Mattei (FEEM), Milan

Multiple version iconThere are 2 versions of this paper

Date Written: May 31, 2013

Abstract

This article studies the effects of tax competition on the provision of public goods under business risk and partial irreversibility of investment. As will be shown, the provision of public goods changes over time and also depends on the business cycle. In particular, under source-based taxation, public goods can be optimally provided during a downturn, in the short term. The converse is true during a recovery, when they are underprovided. In the long term however, tax competition does not affect capital accumulation and therefore, the provision of public goods.

Keywords: irreversibility, risk, short- and long-term effects, tax competition

JEL Classification: H25, H32

Suggested Citation

Moretto, Michele and Panteghini, Paolo M. and Vergalli, Sergio, Tax Competition, Investment Irreversibility and the Provision of Public Goods (May 31, 2013). CESifo Working Paper Series No. 4256. Available at SSRN: https://ssrn.com/abstract=2277415

Michele Moretto

University of Padua, Dep of Economics and Management ( email )

via Del Santo 33
Padova, 35123
Italy
+39 049 8274265 (Phone)
+39 049 8274211 (Fax)

Paolo M. Panteghini (Contact Author)

University of Brescia ( email )

Piazza del Mercato, 15
25122 Brescia
Italy

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Sergio Vergalli

University of Brescia - Department of Economics ( email )

Via San Faustino 74B
Brescia, 25122
Italy

Fondazione Eni Enrico Mattei (FEEM), Milan ( email )

Corso Magenta 63
20123 Milan
Italy

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