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Optimal International Taxation and Growth Rate Convergence: Tax Competition vs. Coordination

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Author Info

  • Assaf Razin
  • Chi-Wa Yuen

Abstract

Optimal international taxation and its implications for convergence in long run income growth rates are analyzed in the context of an endogenously growing world economy with perfect capital mobility. Under tax competition (i) the residence principle will maximize national welfare; (ii) the optimal long run tax rate on capital incomes from various sources will be zero in all countries; and (iii) long term per capita income growth rates will be equalized across countries. Under tax coordination, (i) becomes irrelevant while (ii) and (iii) will continue to hold. In other words, optimal tax policies are growth-equalizing with and without international policy coordination. Copyright Kluwer Academic Publishers 1999

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File URL: http://hdl.handle.net/10.1023/A:1008647804031
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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 6 (1999)
Issue (Month): 1 (February)
Pages: 61-78

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Handle: RePEc:kap:itaxpf:v:6:y:1999:i:1:p:61-78

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: capital mobility; optimal capital taxation; tax competition; tax coordination; growth rate convergence;

References

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  2. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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  17. Jones, Larry E. & Manuelli, Rodolfo E. & Rossi, Peter E., 1997. "On the Optimal Taxation of Capital Income," Journal of Economic Theory, Elsevier, vol. 73(1), pages 93-117, March.
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Citations

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Cited by:
  1. Kollintzas, Tryphon & Philippopoulos, Apostolis & Vassilatos, Vanghelis, 2000. "Is Tax Policy Coordination Necessary?," CEPR Discussion Papers 2348, C.E.P.R. Discussion Papers.
  2. 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.
  3. Geremia Palomba, 2008. "Capital income taxation and economic growth in open economies," International Tax and Public Finance, Springer, vol. 15(6), pages 668-692, December.
  4. Gonzalo Fernández-de-Córdoba & José L. Torres, 2007. "Fiscal harmonization in the presence of public inputs," Working Papers 07-02, Asociación Española de Economía y Finanzas Internacionales.
  5. Baltasar Manzano & Jesús Ruiz, 2004. "Política fiscal óptima: el estado de la cuestión," Investigaciones Economicas, Fundación SEPI, vol. 28(1), pages 5-41, January.
  6. Fernández-de-Córdoba, Gonzalo & Torres, José L., 2012. "Fiscal harmonization in the European Union with public inputs," Economic Modelling, Elsevier, vol. 29(5), pages 2024-2034.
  7. Chu, Angus C. & Yang, C.C., 2012. "Fiscal centralization versus decentralization: Growth and welfare effects of spillovers, Leviathan taxation, and capital mobility," Journal of Urban Economics, Elsevier, vol. 71(2), pages 177-188.
  8. Becker, Daniel Thomas & Rauscher, Michael, 2007. "Fiscal competition in space and time: An endogenous-growth approach," Thuenen-Series of Applied Economic Theory 74, University of Rostock, Institute of Economics.

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