Arbeitspapier
Efficiency in public input provision in two asymmetric jurisdictions with imperfect labour markets
This paper examines efficiency in public input provision in two large jurisdictions with imperfect labour markets. It analyses how equilibrium capital tax rates and public input provision levels differ between asymmetric jurisdictions that can strategically influence the interest rate on the common capital market in an international tax competition setting. In contrast to the scenario assuming competitive labour markets, the non-cooperative equilibrium is inefficient also when governments have capital and head taxes at disposal. As a source of both the distortion in the capital allocation between jurisdictions and the inefficiency in public input provision, which can be determined in at least one of the jurisdictions, we identify the governments' incentives to decrease unemployment, and a pecuniary externality [De- Pater, J., Myers, G., 1994. Strategic capital tax competition: a pecuniary externality and a corrective device. Journal of Urban Economics 36, 66-78.] in both jurisdictions. Efficiency in public input provision can be restored, however, if the set of fiscal instruments available for regional policy makers is extended by a labour tax.
- Language
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Englisch
- Bibliographic citation
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Series: IAB-Discussion Paper ; No. 11/2014
- Classification
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Wirtschaft
Taxation and Subsidies: Efficiency; Optimal Taxation
State and Local Taxation, Subsidies, and Revenue
Unemployment: Models, Duration, Incidence, and Job Search
- Subject
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Tax competition
asymmetric jurisdictions
labour market imperfections
public input provision
- Event
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Geistige Schöpfung
- (who)
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Gillet, Holger
Pauser, Johannes
- Event
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Veröffentlichung
- (who)
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Institut für Arbeitsmarkt- und Berufsforschung (IAB)
- (where)
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Nürnberg
- (when)
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2014
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Gillet, Holger
- Pauser, Johannes
- Institut für Arbeitsmarkt- und Berufsforschung (IAB)
Time of origin
- 2014
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