"The debate on tax competition lacks due attention when it comes to the provision of public goods used by firms in their production process. Indeed, firms may accept higher corporate taxation provided they enjoy good infrastructure and public services. We quantify such trade-off, i.e. the extent to which a 'high tax, high public goods' strategy is attractive to capital as compared to a 'low tax, low public goods' combination. We revisit and develop the popular model of tax competition introduced by Zodrow and Mieszkowski (1986 ) in a way that allows for the testing of its main prediction. The under-provision of public inputs can be tested econometrically by estimating and comparing two simple elasticities: capital with respect to the tax rate, and capital with respect to public inputs. We regress US foreign direct investment in 18 EU countries over 1994-2003 on several variables, including the corporate tax rate and the stock of public capital, used as a proxy for public input. Based on these estimations ( - 1.1 for the tax elasticity and +0.2 for the public input elasticity), we conclude that raising public input through an increase in the corporate tax rate reduces inward FDI, and that tax competition may indeed lead to an under-provision of public inputs. Furthermore, a 'high' equilibrium (high taxation and high level of public input) is not attainable for a country starting from a 'low' equilibrium unless households have a strong preference for public inputs. On the whole, the impact of tax competition may be more diverse than a mere 'race to the bottom'." Copyright (c) CEPR, CES, MSH, 2007.

To analyze equality of opportunity we examine the influence of family characteristics on the distribution of outcome for a given generation. Here, we study changes in equality of opportunity for income acquisition between 1977 and 1993, conditional on father?s income level and income rank, using the FQP surveys. First, resorting to stochastic dominance criteria, we show that inequality of opportunity appears stable over this period, if one conditions on father?s income level, but has decreased, if one conditions on father?s income rank. Second, we offer an equality of opportunity index, based on the mean logarithmic deviation and show how to decompose the evolution over time of this index using standard intergenerational earnings regression analysis. Using this framework, we show that the first result arises from the stability over time in the intergenerational earnings elasticity while the second stems from a reduction in earnings inequality among fathers between 1977 and 1993. In other words, lower earnings inequality among parents, between these two dates, has translated into lower earnings inequality among children, although the strength of the association between the income of successive generations has remained unchanged.

Is the Renovation of the Goutte d'Or District a Success? An Assessment Using Real-Estate Price Indexes The renovation of La Goutte d'Or, a district near Montmartre (Paris), started in 1985 and continues to this day. Our paper uses the residential housing market as an instrument to evaluate the renovation. We draw on a rich and detailed database on transaction prices, comprising more than 380,000 observations over the period 1981-2001. We can thus study the dynamics of the residential housing market by estimating hedonic price indexes for all of Paris, for the districts under renovation, and for a “control” district. At the district level, we detect a short-term but apparently unsustainable effect of the renovation. At the individual housing level, we provide empirical evidence that the negative externality generated by La Goutte d'Or has been weakening since the start of the project.

Individuals, initially living in a Mirrleesian economy A, have outside options consisting in settling down in a laissez-faire country B while paying positive migration costs. We first examine the effect of the threat of migration, assuming participation constraints are taken into account for all individuals, and show that optimal linear income taxes are obtained as corner solutions. We then consider a social criterion allowing emigration of the highest-skilled individuals and show by means of an example that social welfare may rise following an increase in income redistribution, despite this resulting in the departure of the most productive individuals. Numerical simulations on French data illustrate the lack of degrees of freedom offered by linear taxation when agents can vote with their feet, which may be regarded as an argument against linear taxes.