In a common market with costless mobility of all factors, regional governments can attract mobile firms by granting subsidies which must be financed out of wage taxes on mobile labour. Since firms locate where subsidies are highest and workers settle where taxes are lowest, government are forced...

This paper tries to explain the declining level of public investment in OECD countries. The theoretical framework hints to the relevance of a number of demand and supply factors - ranging from the yield of public investment to institutions like the EU deficit limits. The econometric results...