Tax Competition,Investment Irreversibility and the Provision of Public Goods |
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| Authors: | Michele Moretto Paolo M. Panteghini Sergio Vergalli |
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| Affiliation: | 1. University of Padova, Fondazione Eni Enrico Mattei and Centro Studi Levi‐Cases;2. Università degli Studi di Brescia, CESifo and AccounTax Lab;3. University of Brescia and Fondazione Eni Enrico Mattei, Italy |
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| Abstract: | This article studies the effects of tax competition on the provision of public goods under business risk and partial irreversibility of investment. As will be shown, the provision of public goods changes over time and also depends on the business cycle. In particular, under source‐based taxation, in the short term, public goods can be optimally provided during a downturn. The converse is true during a recovery: in this case, they are underprovided. In the long term, however, tax competition does not affect capital accumulation. This means that the provision of public goods is unaffected by taxation. |
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| Keywords: | Irreversibility risk short‐ and long‐term effects tax competition |
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