Fiscal Competition, Capital-Skill Complementarity, and the Composition of Public Spending

Following Keen and Marchand (1997), the paper analyses the effect of fiscal competition on the composition of public spending in a model where capital and skilled workers are mobile while low skilled workers are immobile. Taxes are levied on capital and labour. Each group of workers benefits from a different kind of public good. Mobility of skilled workers provides an incentive for jurisdictions to spend ?too much? on public goods benefitting the skilled and ?too little? on those benefitting low skilled workers. In the case of capital-skill complementarity, this incentive is strengthened. The analysis is then extended to allow for mobility of unskilled labour.

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Year of publication:	2005
Authors:	Borck, Rainald
Publisher:	Berlin : Deutsches Institut für Wirtschaftsforschung (DIW)
Subject:	New-Keynesian Phillips Curve \| Betriebliche Preispolitik \| Preisstatistik \| Schätzung \| Welt \| Tax competition \| capital skill complementarity \| public spending

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Series:	DIW Discussion Papers ; 504
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	494463309 [GVK] hdl:10419/18355 [Handle] RePEc:diw:diwwpp:dp504 [RePEc]
Classification:	J24 - Human Capital; Skills; Occupational Choice; Labor Productivity ; H77 - Intergovernmental Relations; Federalism ; J61 - Geographic Labor Mobility; Immigrant Workers
Source:	EconStor