Tax Competition, Investment Irreversibility and the Provision of Public Goods

Michele Moretto; Sergio Vergalli; Paolo M. Panteghini

doi:10.1111/geer.12058

Article

Tax Competition, Investment Irreversibility and the Provision of Public Goods

Michele Moretto , Sergio Vergalli and Paolo M. Panteghini

Published/Copyright: November 30, 2019

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From the journal German Economic Review Volume 16 Issue 4

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, in the short term, public goods can be optimally provided during a downturn. The converse is true during a recovery: in this case, they are underprovided. In the long term, however, tax competition does not affect capital accumulation. This means that the provision of public goods is unaffected by taxation.

Keywords: Irreversibility; risk; short- and long-term effects; tax competition

Published Online: 2019-11-30

Published in Print: 2015-12-01

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Articles in the same Issue

https://doi.org/10.1111/geer.12058

Keywords for this article

Irreversibility; risk; short- and long-term effects; tax competition