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...

Restrictions on work hours are more important in countries with a large welfare state. We show that this empirical observation is consistent with the strategic effects of such restrictions in a welfare state in the context of optimal direct taxation in the tradition of Mirrlees (1971). Our...

We consider the hold-up problem between a foreign direct investor and the government(s) in a host country with weak governmental structure and lack of power to commit. Using Nash threats, we show that an efficient investment level can be sustained for a sufficiently high discount factor and ask...

"Both in the developed and developing world, decentralization of fiscal policy is frequently argued to foster investment, because allowing investors to choose between competing locations should make it difficult for each jurisdiction to tax the investment's returns. We point out that this...

This paper shows that vertical fiscal inefficiencies impede federally organized countries in successfully attracting foreign direct investment. Such countries, particularly if characterized by weak institutions, are disadvantaged in the process of bidding for firms and in their ability to commit...

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 labour, since this induces the sponsor to provide...

Restrictions on work hours are more important in countries with a large welfare state. We show that this empirical observation is consistent with the strategic effects of such restrictions in a welfare state in the context of optimal direct taxation in the tradition of Mirrlees (1971). Our...