2024-03-29T04:55:22Z
https://nagoya.repo.nii.ac.jp/oai
oai:nagoya.repo.nii.ac.jp:00030818
2023-01-16T04:03:57Z
1076:1077:1078
Nash Equilibria in Models of Fiscal Competition with Unemployment
Tamai, Toshiki
102131
Kikuchi, Yuya
102132
Fiscal Competition
Unemployment
2020-11
This paper examines two different fiscal competition games under labor market imperfection. Given that capital moves across regions and affects regional employment, governments must choose expenditure levels and tax rates on such mobile capital by accounting for the effects of fiscal variables on both capital and labor. Then, governments may play these games with either tax rates on mobile capital or with public expenditures. The presence/absence of absentee ownership of capital and employment externalities are important factors for characterizing two distinct Nash equilibria, one that occurs with tax competition and the other with expenditure competition. In particular, and contrary to the existing literature, tax rates under tax competition are likely to be more competitive than under expenditure competition because of employment externalities. Furthermore, in some cases, governments prefer to choose government expenditure as their strategic variable rather than tax rates. The presence of employment externalities motivates governments to use government expenditure as the strategic variable through which it might encourage strategic effects.
This work was supported by JSPS KAKENHI Grant Numbers 16K03726, 16KK0077, and 20H01492.
departmental bulletin paper
名古屋大学大学院経済学研究科附属国際経済政策研究センター
2020-11
Economic Research Center Discussion Paper
E20-4
1
20
eng
E-Series;E20-4