This study examines two different fiscal competition games under labor market imperfections. Given that capital moves across regions and affects regional employment, governments must choose the expenditure level and tax rate on such mobile capital by accounting for the effects of fiscal variables on both capital and labor. Therefore, governments may play these games with either the tax rates on mobile capital or with public expenditures. The presence/absence of absentee ownership of capital and employment externalities are significant factors that characterize two distinct Nash equilibria, one that occurs with tax competition and the other with expenditure competition. Contrary to the existing literature, tax rates under tax competition are likely to be lower than those under expenditure competition owing to employment externalities. In some cases, governments prefer to choose government expenditure as their strategic variable rather than the tax rate. The presence of employment externalities motivates governments to use such expenditure as the variable through which it may strengthen strategic effects.

中文翻译：

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财政竞争与失业模型中的纳什均衡

本研究考察了劳动力市场不完善下的两种不同的财政竞争博弈。鉴于资本跨地区流动并影响地区就业，政府必须通过考虑财政变量对资本和劳动力的影响来选择这种流动资本的支出水平和税率。因此，政府可以利用流动资本税率或公共支出来玩这些游戏。缺席资本所有权和就业外部性的存在/不存在是表征两种不同纳什均衡的重要因素，一种是在税收竞争中出现，另一种是在支出竞争中出现。与现有文献相反，由于就业外部性，税收竞争下的税率可能低于支出竞争下的税率。在某些情况下，政府更愿意选择政府支出而不是税率作为其战略变量。就业外部性的存在促使政府利用此类支出作为增强战略效应的变量。