Is tax competition good for economic growth? We address this question by means of a simple
model of endogenous growth. Governments in a system of many small jurisdictions
benevolently maximise the welfare of immobile residents. Quadratic (de-) installation costs
limit the mobility of capital. We look at optimal taxation and long-run growth and analyse the
effects of cost parameter variations on taxation and growth. A race to the bottom in capital tax
rates is only one possibility; the relationship between capital mobility and capital tax rates is
not monotone. Growth and capital mobility are unambiguously positively related.