Public Goods Provision, Redistribution and Capital Mobility

Two results follow from the standard workhorse model of tax competition. One is that tax competition between countries leads to underprovision of public consumption goods (see Zodrow and Mieszkowski 1986). The other that tax competition lowers capital taxes and may lead to less redistribution due to higher efficiency costs of capital taxation. This paper embeds both public goods provision and redistribution in a single model framework, and shows that preferences for income redistribution may alter the standard result of under-provision of public goods under tax competition