Fiscal Competition for
Imperfectly-Mobile Labor and Capital: A Comparative Dynamic
Analysis
by
David E. Wildasin Martin School of Public Policy and Department of Economics University of Kentucky Lexington, KY 40506-0027 USA
Abstract
Interjurisdictional flows of
imperfectly-mobile migrants, investment, and other productive
resources result in the costly dynamic adjustment of resource
stocks. This paper investigates the comparative dynamics of
adjustment to changes in local fiscal policy with two imperfectly
mobile productive resources. The intertemporal adjustments for both
resources depend on complentarity/substituability in production and
the adjustment cost technologies for each, implying that the
evaluation of the fiscal treatment of one resource must account for
the simultaneous adjustment of both.
