This paper argues that the governmental decisions on corporate tax and public capital stock are not independent. In order to explain this relationship, we have built a general equilibrium model of corporate tax competition where governments supply public capital and compete for corporate...

The paper provides estimates of the long-run, tax-adjusted, user cost elasticity of capital (UCE) in a small open economy, exploiting three sources of variation in Canadian tax policy: across provinces, industries, and years. Estimates of the UCE with Canadian data are less prone to the...