Countries compete for new FDI investment, whereas stocks of FDI generate agglomeration benefits and are potentially subject to extortionary taxation. We study the interaction between these aspects in a simple vintage capital framework with discrete time and infinite horizon, focussing on Markov...

High employment protection in the public sector results in strategic over-employment if government divisions compete for budgets in a dynamic setting. Bureaucrats who are interested in maximising their divisions' output employ excess labor, since this induces the sponsor to provide complementary...

We consider redistributional taxation between people with and without human capital if education is endogenous and if individuals differ in their perceptions about own ability. Those who see their ability as low like redistributive taxation because of the transfers it generates. Those who see...