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Local capital tax competition and coordinated tax reform in an overlapping generations economy

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  • Batina, Raymond G.

Abstract

We extend the classic capital tax competition model to an overlapping generations economy and study the effects of a coordinated reform where capital tax rates across all locations are increased to alleviate the policy externality. Welfare across generations is examined and several new effects are derived. Simulations calibrated to US data indicate these effects may be as large as the spending effect of the classic model. The initial old generation, however, may not be better off, and an additional transfer from the initial young to the initial old may be required for the reform to be a Pareto improvement.

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  • Batina, Raymond G., 2009. "Local capital tax competition and coordinated tax reform in an overlapping generations economy," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 472-478, July.
    • Handle: RePEc:eee:regeco:v:39:y:2009:i:4:p:472-478
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    Cited by:

    1. Raymond Batina, 2012. "Capital tax competition and social security," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(6), pages 819-843, December.
    2. Arcalean, Calin, 2018. "Dynamic fiscal competition: A political economy theory," Journal of Public Economics, Elsevier, vol. 164(C), pages 211-224.
    3. Timothy P. Hubbard & Justin Svec, 2015. "A Model of Tradeable Capital Tax Permits," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(6), pages 916-942, December.
    4. Akira Yakita, 2014. "Capital Tax Competition and Cooperation with Endogenous Capital Formation," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 459-468, August.
    5. Timothy P. Hubbard & Justin Svec, 2012. "A Model of Tradeable Capital Tax Permits," Working Papers 1202, College of the Holy Cross, Department of Economics.

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