We set up a model to characterize the reaction functions of governments competing for mobile capital by simultaneously setting both the business tax rate as well as the level of provision of a productive public input. Using a rich data set of local jurisdictions, we then test the predictions of...

We address the role of labor cost differentials for national tax policies. Using a simple theoretical framework with two countries competing for a mobile firm, we show that in a bidding race for FDI, it is optimal for governments to compensate firms for international labor cost differentials....

This paper analyses tax competition between a unionised and a non-unionised country for the location of an outside firm. We show that unionisation offers an extra incentive for the government to attract a foreign competitor to a concentrated domestic market, in order to affect the behaviour of...

This paper analyses tax competition between a unionised and a non-unionised country for the location of an outside firm. We show that unionisation offers an extra incentive for the government to attract a foreign competitor to a concen- trated domestic market, in order to affect the behaviour of...

This paper addresses the role that foreign vs. domestic ownership of companies plays for governments in asymmetric countries' competition for a multinational's subsidiary. I argue that equilibrium subsidies as well as a foreign investor's location decision in policy competition between these...

This paper analyzes competition for capital between welfare-maximizing gov- ernments in a framework with agglomeration tendencies and asymmetric union- ization. We find that a unionized country's government finds it optimal to use tax policy to induce industry to relocate towards a location with...

This paper addresses the role that foreign vs. domestic ownership of companies plays for governments in asymmetric countries' competition for a multinational's subsidiary. I argue that equilibrium subsidies as well as a foreign investor's location decision in policy competition between these...

This paper analyses tax competition between a unionised and a non-unionised country for the location of an outside firm. We show that unionisation offers an extra incentive for the government to attract a foreign competitor to a concentrated domestic market, in order to affect the behaviour of...

Credibility of the revised fiscal rules will be crucial so that vulnerable countries can benefit from confidence effects. National ownership will be key in that respect and can be supported via a stronger role of independent national fiscal institutions.

We analyse the effectiveness of optimal simple and implementable monetary and fiscal policy rules in stabilising economic activity, inflation and government debt in face of an occasionally binding lower bound on the nominal interest rate in a New Keynesian model. We show that, within the...