Fiscal Competition in Space and Time: An Endogenous-Growth Approach

29 Pages Posted: 6 Jul 2007

See all articles by Daniel Thomas Becker

Daniel Thomas Becker

University of Rostock - Faculty of Business Administration, Economics and Social Sciences

Michael Rauscher

University of Rostock - Department of Economics; University of Rostock - Faculty of Business Administration, Economics and Social Sciences; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: July 2007

Abstract

Is tax competition good for economic growth? The paper addresses this question by means of a simple model of endogenous growth. There are many small jurisdictions in a large federation and individual governments benevolently maximise the welfare of immobile residents. Investment is costly: Quadratic installation and de-installation costs limit the mobility of capital. The paper looks at optimal taxation and long-run growth. In particular, the effects of variations in the cost parameter on economic growth and taxation are considered. It is shown that balanced endogenous growth paths do not always exist and effects of changes in installation costs are ambiguous.

JEL Classification: H21, H72, O41

Suggested Citation

Becker, Daniel Thomas and Rauscher, Michael, Fiscal Competition in Space and Time: An Endogenous-Growth Approach (July 2007). CESifo Working Paper No. 2048, Available at SSRN: https://ssrn.com/abstract=998768

Daniel Thomas Becker

University of Rostock - Faculty of Business Administration, Economics and Social Sciences ( email )

Ulmenstr. 69
Rostock, 18057
Germany

HOME PAGE: http://www.wiwi.uni-rostock.de/vwl

Michael Rauscher (Contact Author)

University of Rostock - Department of Economics ( email )

Ulmenstr. 69
Rostock, 18057
Germany

HOME PAGE: http://www.wiwi.uni-rostock.de/vwl

University of Rostock - Faculty of Business Administration, Economics and Social Sciences ( email )

Ulmenstr. 69
Rostock, 18057
Germany

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

Poschinger Str. 5
Munich, DE-81679
Germany

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