IDEAS home Printed from https://ideas.repec.org/a/kap/openec/v9y1998i1p5-20.html
   My bibliography  Save this article

Welfare Effects of Capital Taxation in a Small Open Economy

Author

Listed:
  • Shuanglin Lin
  • Wei Zhang

Abstract

In a small open economy, the welfare effect of capital taxation depends on the allocation of the tax revenue as well as the tax system. If tax revenues are used to finance debt or government spending, an increase in either residential or territorial capital taxation will reduce the welfare of the representative individual. If tax revenues are transferred intergenerationally, an increase in the residential capital tax rate will increase the steady-state welfare when the after-tax interest rate is greater than the growth rate. If the revenue is rebated to the tax payer, an introduction of territorial capital taxation may increase welfare when the growth rate is relatively high. In the case where either the revenue from residential capital taxation is rebated to the tax payer or the revenue from territorial capital taxation is transferred intergenerationally, the welfare-maximizing tax rate appears to be zero. Copyright Kluwer Academic Publishers 1998

Suggested Citation

  • Shuanglin Lin & Wei Zhang, 1998. "Welfare Effects of Capital Taxation in a Small Open Economy," Open Economies Review, Springer, vol. 9(1), pages 5-20, January.
    • Handle: RePEc:kap:openec:v:9:y:1998:i:1:p:5-20
    DOI: 10.1023/A:1008240822015
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1023/A:1008240822015
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1023/A:1008240822015?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ihori, Toshihiro, 1991. "Capital Income Taxation in a World Economy: A Territorial System versus a Residence System," Economic Journal, Royal Economic Society, vol. 101(407), pages 958-965, July.
    2. Jacob Frenkel & Assaf Razin & Efraim Sadka, 1991. "International Taxation in an Integrated World," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061430, December.
    3. Buiter, Willem H, 1981. "Time Preference and International Lending and Borrowing in an Overlapping-Generations Model," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 769-797, August.
    4. Keen, Michael, 1990. "Welfare Effects of Capital Income Tax Reform in a Growing World Economy," Public Finance = Finances publiques, , vol. 45(2), pages 283-303.
    5. Batina, Raymond G. & Ihori, Toshihiro, 1991. "International spillover effects of consumption taxation," Journal of the Japanese and International Economies, Elsevier, vol. 5(4), pages 404-420, December.
    6. Sibert, Anne, 1990. "Taxing capital in a large, open economy," Journal of Public Economics, Elsevier, vol. 41(3), pages 297-317, April.
    7. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    8. Persson, Torsten, 1985. "Deficits and intergenerational welfare in open economies," Journal of International Economics, Elsevier, vol. 19(1-2), pages 67-84, August.
    9. Nielsen, Soren Bo & Sorensen, Peter Birch, 1991. "Capital income taxation in a growing open economy," European Economic Review, Elsevier, vol. 35(1), pages 179-197, January.
    10. Bovenberg, A.L., 1986. "Capital income taxation in growing open economies," Other publications TiSEM d92d32f6-df9f-418b-bbd3-d, Tilburg University, School of Economics and Management.
    11. Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
    12. Diamond, Peter A., 1970. "Incidence of an interest income tax," Journal of Economic Theory, Elsevier, vol. 2(3), pages 211-224, September.
    13. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-544, September.
    14. Dornbusch, Rudiger, 1985. "Intergenerational and international trade," Journal of International Economics, Elsevier, vol. 18(1-2), pages 123-139, February.
    15. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
    16. Laurence J. Kotlikoff & Lawrence H. Summers, 1979. "Tax Incidence in a Life Cycle Model with Variable Labor Supply," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(4), pages 705-718.
    17. Bovenberg, A. Lans, 1986. "Capital income taxation in growing open economies," Journal of Public Economics, Elsevier, vol. 31(3), pages 347-376, December.
    18. Gordon, Roger H, 1986. "Taxation of Investment and Savings in a World Economy," American Economic Review, American Economic Association, vol. 76(5), pages 1086-1102, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shuanglin Lin, 1994. "Capital taxation and accumulation in a growing world economy with deficit finance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 1(2), pages 127-146, October.
    2. Lin, Shuanglin, 1999. "Tax reform and external balance," Journal of International Money and Finance, Elsevier, vol. 18(6), pages 891-909, December.
    3. Lin, Shuanglin, 2008. "China's value-added tax reform, capital accumulation, and welfare implications," China Economic Review, Elsevier, vol. 19(2), pages 197-214, June.
    4. Shuanglin Lin, 1998. "Taxing Consumption in an Open Economy," Public Finance Review, , vol. 26(3), pages 250-269, May.
    5. Lin, Shuanglin, 2004. "China's capital tax reforms in an open economy," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 128-147, March.
    6. Asea, Patrick K. & Turnovsky, Stephen J., 1998. "Capital income taxation and risk-taking in a small open economy," Journal of Public Economics, Elsevier, vol. 68(1), pages 55-90, April.
    7. Turnovsky, Stephen J & Bianconi, Marcelo, 1992. "The International Transmission of Tax Policies in a Dynamic World Economy," Review of International Economics, Wiley Blackwell, vol. 1(1), pages 49-72, November.
    8. Turnovsky, Stephen J., 1996. "Fiscal policy, growth, and macroeconomic performance in a small open economy," Journal of International Economics, Elsevier, vol. 40(1-2), pages 41-66, February.
    9. Jiming Ha & Anne Sibert, 1997. "Strategic Capital Taxation in Large Open Economies with Mobile Capital," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(3), pages 243-262, July.
    10. Lin, Shuanglin, 1998. "Labor income taxation and human capital accumulation," Journal of Public Economics, Elsevier, vol. 68(2), pages 291-302, May.
    11. Nicolas Coeurdacier, 2012. "The international taxation of capital," 2012 Meeting Papers 440, Society for Economic Dynamics.
    12. Akira Yakita, 2014. "Effects of capital taxation on economies with different demographic changes: short term versus long term," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(1), pages 257-273, January.
    13. Jiming Ha & Anne Sibert, 1997. "Strategic Capital Taxation in Large Open Economies with Mobile Capital," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(3), pages 243-262, July.
    14. Razin, Assaf & Yuen, Chi-Wa, 1996. "Capital income taxation and long-run growth: New perspectives," Journal of Public Economics, Elsevier, vol. 59(2), pages 239-263, February.
    15. Mr. Geremia Palomba, 2004. "Capital Income Taxation and Economic Growth in Open Economies," IMF Working Papers 2004/091, International Monetary Fund.
    16. Josef Honerkamp & Stefan Moog & Bernd Raffelhüeschen, 2004. "Earlier Or Later: A General Equilibrium Analysis of Bringing Forward an Already Announced Tax Reform," Public Economics 0409012, University Library of Munich, Germany.
    17. Enrique G. Mendoza, 2001. "The International Macroeconomics of Taxation and the Case Against European Tax Harmonization," NBER Working Papers 8217, National Bureau of Economic Research, Inc.
    18. Yasushi Iwamoto & Akihisa Shibata, 1999. "Foreign Tax Credit and the Current Account," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(2), pages 131-148, May.
    19. Mourmouras, Iannis A. & Ghosh, Sugata, 2000. "Fiscal Policies and the Terms of Trade in an Endogenous Growth Model with Overlapping Generations," Journal of Macroeconomics, Elsevier, vol. 22(3), pages 445-470, July.
    20. James B. Davies & Jinli Zeng & Jie Zhang, 2009. "Time‐consistent taxation in a dynastic family model with human and physical capital and a balanced government budget," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(3), pages 1023-1049, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:9:y:1998:i:1:p:5-20. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.