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International Asset Trade, Capital Income Taxation, and Specialization Patterns

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  • KOICHI FUTAGAMI
  • AKIHIKO KANEKO
  • YOSHIYASU ONO
  • AKIHISA SHIBATA

Abstract

This paper constructs a small economy version of dynamic Heckscher‐Ohlin models with overlapping generations and analyzes effects of capital income taxation on the specialization pattern of the country. It is shown that once international asset trade is allowed, in the presence of international technological asymmetries, a small country eventually leads to perfect specialization in our overlapping generations model. It is also shown that the residence‐based tax has no effect on the specialization pattern while the source‐based tax has a negative effect on capital accumulation and thereby it can affect the specialization pattern of the small country.

Suggested Citation

  • Koichi Futagami & Akihiko Kaneko & Yoshiyasu Ono & Akihisa Shibata, 2008. "International Asset Trade, Capital Income Taxation, and Specialization Patterns," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(5), pages 743-763, October.
    • Handle: RePEc:bla:jpbect:v:10:y:2008:i:5:p:743-763
    DOI: 10.1111/j.1467-9779.2008.00384.x
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    Cited by:

    1. Yoshiyasu Ono & Akihisa Shibata, 2006. "Capital Income Taxation and Specialization Patterns: Investment Tax vs. Saving Tax," ISER Discussion Paper 0649, Institute of Social and Economic Research, Osaka University.

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