This paper discusses how local tax rates of the business tax are set when communities compete for capital as a mobile factor. In a theoretical model communities provide public inputs financed by a tax on capital income in order to maximize a general objective function, which includes residents'...

In a theoretical model local jurisdictions provide a public input an d a public consumption good financed by a tax on capital income. When deciding about tax rate and budget structure the jurisdictions will generally respond to each others fiscal choices irrespective of whether the policy is...

We here expand the static tax competition models in symmetric small regions, which were indicated by Zodrow and Mieszkowski (1986) and Wilson (1986), to a dynamic tax competition model in large regions, taking consideration of the regional asymmetry of productivity of public capital and the...

This chapter surveys work in behavioral public economics, emphasizing the normative implications of non-standard decision making for the design of welfare-improving and/or optimal policies. We highlight combinations of theoretical and empirical approaches that together can produce robust...

We provide an introduction to optimal fiscal and monetary policy using the primal approach to optimal taxation. We use this approach to address how fiscal and monetary policy should be set over the long run and over the business cycle. We find four substantive lessons for policymaking: Capital...

This paper studies the spending response to news about a dividend tax reform to estimate the elasticity of intertemporal substitution (EIS). The Norwegian dividend tax reform was proposed in 2003, announced in 2004, and implemented in 2006, raising the dividend tax rate by 28 percentage points....