Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/24334 
Year of Publication: 
1999
Series/Report no.: 
ZEW Discussion Papers No. 99-52
Publisher: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
Abstract: 
In a common market with costless mobility of all factors, regional governments can attract mobile firms by granting subsidies which must be financed out of wage taxes on mobile labour. Since firms locate where subsidies are highest and workers settle where taxes are lowest, government are forced "in the splits" (double Bertrand-type tax competition). We assume that without government intervention there is unemployment in the economy. Then regional governments behave like middlemen in the (distorted) labour market and the fiscal game takes the form of competition among strategic intermediaries. Results from the theory of intermediation are applied to this framework, enabling us to explain why government size may increase rather than decline under the the pressures of ongoing economic integration, how industrial clustering may emerge from tax competition, or how unemployment can be turned into job vacancies.
Subjects: 
Tax Competition
Fiscal Games
Subsidy Wars
JEL: 
H77
Document Type: 
Working Paper

Files in This Item:
File
Size
404.81 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.