TY  - JOUR
AU  - Janeba,Eckhard
AU  - Schjelderup,Guttorm
TI  - Why Europe Should Love Tax Competition - and the U.S. Even More So
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9334
PY  - 2002
Y2  - November 2002
UR  - http://www.nber.org/papers/w9334
L1  - http://www.nber.org/papers/w9334.pdf
N1  - Author contact info:
Eckhard Janeba
University of Mannheim
Department of Economics
L7, 3-5
68131 Mannheim
Germany
Tel: ++49-621-181 1795
E-Mail: janeba@rumms.uni-mannheim.de
AB  - Is global competition for mobile capital harmful (less public goods) or beneficial (less government waste)? This paper combines both aspects within a generalized version of the comparative public finance model (Persson, Roland and Tabellini, 2000) by introducing multiple countries and endogenous tax bases. We consider the role of political institutions and compare parliamentary democracies (Europe) and presidential-congressional systems (USA) to show that increasing tax competition is likely to improve voter welfare, even if public good supply decreases because rents to politicians also fall. The conditions for voter welfare to improve are less stringent under the presidential-congressional system than under parliamentary democracies. Increasing tax competition lowers voter welfare if the only benefit to politicians is to divert resources from the government budget and the future is valued highly.
ER  -