Fiscal Harmonization and Portfolio Choice
AbstractIn this paper, we consider a two-country model based on Svensson (1989) in order to analyze how fiscal harmonization impacts on economic growth and welfare through its effects on agents portfolio decisions in an uncertain world. We derive the conditions under which fiscal harmonization proves to be welfare enhancing and analyse how the set of initial tax rates leading to a welfare improving harmonization is affected by uncertainty and assets returns correlation. In particular, the results obtained suggest that the probability for tax harmonization to be welfare improving is first increasing and then decreasing with uncertainty while it monotonically decreases with the correlation between the assets returns shocks.
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Bibliographic InfoPaper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 02.16.
Length: 29 pp.
Date of creation: Mar 2002
Date of revision:
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More information through EDIRC
fiscal harmonization; growth; uncertainty;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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