It is widely perceived that globalization squeezes public sector activities by making taxation more costly. This is attributed to increased factor mobility and to a more elastic labour demand due to improved scope for relocation of production and thus employment across countries.We argue that...

We develop a model that combines competitive exchange of private commodities across endogenously formed groups with public good provision and global collective decisions. There is a tension between local and global collective decisions. In particular, we show that group formation and collective...

We construct a general equilibrium model of a two-country trading block where governments through tax policies attract mobile capital, and provide an imported public consumption good. At Nash equilibrium, when the public good is under-provided, (i) a country with a large GDP, has a large Nash...