Is tax competition good for economic growth? The paper addresses this question by means of a simple model of economic growth in which a wasteful Leviathan state sets taxes and provides productive input. Wasteful behaviour is restricted by the voter, who reduces political support if her income is...

Many theoretical models show that redistribution causes low growth or capital outflows even though empirically redistribution and growth are often found to be positively associated across countries. This paper argues that tax competition and the danger of capital outflows leads optimizing...