Expenditure Competition

Expenditure Competition

Foreign Direct Investment, Tax Competition and Social Expenditure

The aim of this paper is to make a first step towards studying the role of social expenditure and its interaction with corporate taxation in determining the destination of foreign direct investment (FDI) flows. Using panel data for 18 OECD countries and measuring the extent of social welfare policies by the (public social expenditure)/GDP ratio, we find strong support for the conjecture that re...

Tax Competition and Revelation of Preferences for Public Expenditure

One of the important problems facing jurisdictions in an open economy is tax competition. This problem arises when the tax base is mobile among jurisdictions, in particular when they use source-based taxes on capital income to finance their public expenditure. Stigler ( 1957 ) was among the first to recognize the nature of this problem. If the tax base is mobile among jurisdictions, each jurisd...

Brain Drain, Fiscal Competition, and Public Education Expenditure

Brain Drain, Fiscal Competition, and Public Education Expenditure This paper uses a two-country model with integrated markets for high-skilled labor to analyze the opportunities and incentives for national governments to provide higher education. Countries can differ in productivity, and education is financed through a wage tax, so that brain drain affects the tax base and has agglomeration eff...

Productive Public Expenditure and Imperfect Competition with Endogenous Price Markup: Comment

In a recent article Chen et al. (2005) analyse the role of government expenditure in an imperfectly competitive static model, introducing a government-expenditure externality through the production function. Our purpose in the present paper is to argue that the claim from the authors that their model generates an endogenous markup is in our view incorrect. We argue that their model does not con...