After libaralization of trade and capital restrictions in the 80s, countries have become competiting for scarce factors. It is not only capital which has become more and more mobile. After the adoption of the internal market (1.1.1992) also labour has the opportunity to move to jurisdrictions where the price-quality relation of government activities satisfies the citizen´s needs. However in reality labour is much less mobile compared to capital.
The goal of the dissertation is to ask whether increasing mobility has an impact on the design of government expenditures in a country, especially the welfare state. The tax competition literature suggests that without tax coordination the provision of public goods and social insurance will be „competed“ away. Pooled regression analysis will be used to explore the relationship beetween factor mobility and government expenditures.