Is global competition for mobile capital harmful (less public goods) or beneficial(less government waste)? This paper combines both aspects within a generalizedversion of the comparative public finance model (Persson, Roland and Tabellini,2000) by introducing multiple countries and endogenous tax bases. We consider therole of political institutions and compare parliamentary democracies (Europe) andpresidential-congressional systems (USA) to show that increasing tax competitionis likely to improve voter welfare, even if public good supply decreases because rentsto politicians also fall. The conditions for voter welfare to improve are less stringentunder the presidential-congressional system than under parliamentary democracies.Increasing tax competition lowers voter welfare if the only benefit to politicians isto divert resources from the government budget and the future is valued highly.
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