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Convergence in Growth Rates: A Quantitative Assessment of the Role of Capital Mobility and International Taxation

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  • Razin, Assaf
  • Yuen, Chi-Wa

Abstract

We provide an exploratory quantitive analysis of the role of capital mobility and international taxation in explaining the observed cross-country diversity in the long-run rates of growth of per capita and total incomes as well as the population growth rates. Corroborative evidence is found for the theoretical results on the convergence/divergence in long-term population, per capita and total income growth rates obtained in Razin and Yuen (1992). In particular, the data (and casual observation) show: (1) that population growth and per capita income growth are negatively correlated across countries; (2) that the total income growth rates are less variable than the per capita income growth rates across countries; and (3) that asymmetry in capital income tax rates, coupled with the residence principle of international income taxation, can be an important source of cross-country differences in per capita income growth. Our computer simulations indicate that although the effects of liberalizing capital flows on long-run growth may not be all that sizeable, capital mobility can magnify the growth effects of changes in capital income tax rates as a result of cross-border policy spillovers.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 794.

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Date of creation: Jul 1993
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Handle: RePEc:cpr:ceprdp:794

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Keywords: Capital Mobility; Economic Growth; Human Capital Accumulation; International Taxation; Population Growth;

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References

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  1. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc.
  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 0262512149, December.
  3. King, R.G. & Rebelo, S., 1988. "Public Policy And Economic Growth: Developing Neoclassical Implications," RCER Working Papers 225, University of Rochester - Center for Economic Research (RCER).
  4. Robert J. Barro & N. Gregory Mankiw & Xavier Sala-i-Martin, 1994. "Capital mobility in Neoclassical models of growth," Economics Working Papers 82, Department of Economics and Business, Universitat Pompeu Fabra.
  5. Romer, P.M., 1988. "Capital Accumulation In The Theory Of Long Run Growth," RCER Working Papers 123, University of Rochester - Center for Economic Research (RCER).
  6. Becker, Gary S & Lewis, H Gregg, 1973. "On the Interaction between the Quantity and Quality of Children," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages S279-88, Part II, .
  7. Ehrlich, Isaac & Lui, Francis T, 1991. "Intergenerational Trade, Longevity, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1029-59, October.
  8. 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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Cited by:
  1. Yi Feng & Jacek Kugler & Paul Zak, . "The Path to Prosperity: A Political Model of Demographic Change," Claremont Colleges Working Papers 1999-23, Claremont Colleges.
  2. Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2005. "Capital Flows in a Globalized World: The Role of Policies and Institutions," NBER Working Papers 11696, National Bureau of Economic Research, Inc.
  3. Laura Alfaro & Sebnem Kalemli-Ozcan, 2004. "Why doesn't capital flow from rich to poor countries? An empirical investigation," 2004 Meeting Papers 53, Society for Economic Dynamics.

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