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A Note on Intertemporal Fiscal Competition and Redistribution

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Abstract

This paper studies fiscal competition among jurisdictions in a dynamic framework, where the degree of mobility of private capital across jurisdictions boundaries is perfect. The optimal tax on mobile capital is a source tax that taxes away factor rents. Further we show that taxation of mobile capital can redistribute income in favor of the immobile factor labor. This is because the factor rents generated by public inputs and appropriated by mobile capital exceed the efficient level of public expenditure for investments.

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Authors and Affiliations

  1. Center of Public Finance, University of Fribourg, Beauregard 13, CH-1700, Fribourg, Switzerland

    Kersten Kellermann

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  1. Kersten Kellermann
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Correspondence to Kersten Kellermann.

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JEL Code: H21, H23, H42, H71

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Kellermann, K. A Note on Intertemporal Fiscal Competition and Redistribution. Int Tax Public Finan 13, 151–161 (2006). https://doi.org/10.1007/s10797-006-2462-3

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  • DOI: https://doi.org/10.1007/s10797-006-2462-3

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