Interjurisdictional Spillovers, Decentralized Policymaking and the Elasticity of Capital Supply
AbstractThis paper points to the important role which the elasticity of aggregate capital supply with respect to the net rate of return to capital plays for the efficiency of policymaking in a decentralized economy with mobile capital and spillovers among jurisdictions. In accordance with previous studies, we show that under the assumption of a fixed capital supply (zero capital supply elasticity) the decentralized policy choice is optimal. If the capital supply elasticity is strictly positive, however, capital tax rates are inefficiently low in the decentralized equilibrium.
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Bibliographic InfoPaper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 100019.
Length: 10 pages
Date of creation: Sep 2010
Date of revision:
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More information through EDIRC
decentralized policymaking; spillovers; capital supply elasticity;
Other versions of this item:
- Thomas Eichner & Marco Runkel, 2012. "Interjurisdictional Spillovers, Decentralized Policymaking, and the Elasticity of Capital Supply," American Economic Review, American Economic Association, vol. 102(5), pages 2349-57, August.
- Thomas Eichner & Marco Runkel, 2010. "Interjurisdictional Spillovers, Decentralized Policymaking and the Elasticity of Capital Supply," CESifo Working Paper Series 3214, CESifo Group Munich.
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
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