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Integration of the International Capital Markets: The Size of Government and Tax Coordination

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Author Info
Assaf Razin
Efraim Sadka

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Abstract

International-capital market integration has become a key policy issue in the prospective integration of Europe of 1992. In this context this paper provides a theoretical analysis of the effects of relaxing restrictions on the international flow of capital on the fiscal branch of government: the optimal provision of public goods, the structure of taxation and income redistribution policies. Concerning issues of interdependent economies the paper analyzes the scope of tax coordination. The major findings are: (a) with no administrative barriers to capital flows the optimal policy is to tax income from investment abroad and from investments at home at the same time; (b) the cost of public funds falls and the supply of public goods rises if restrictions on international capital flows are relaxed: (c) the amount of income redistributions increases with the international capital market liberalization; (d) some minimal degree of tax coordination (such as origin-based or source-based tax schemes) is essential for the existence of an equilibrium in an integrated world economy.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2863.

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Date of creation: Jul 1990
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Handle: RePEc:nbr:nberwo:2863

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Stiglitz, Joseph E., 1982. "Utilitarianism and horizontal equity : The case for random taxation," Journal of Public Economics, Elsevier, vol. 18(1), pages 1-33, June. [Downloadable!] (restricted)
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  2. Balcer, Yves & Sadka, Efraim, 1982. "Horizontal equity, income taxation and self-selection with an application to income tax credits," Journal of Public Economics, Elsevier, vol. 19(3), pages 291-309, December. [Downloadable!] (restricted)
  3. Sadka, Efraim, 1977. "A Note on Producer Taxation and Public Production," Review of Economic Studies, Blackwell Publishing, vol. 44(2), pages 385-87, June. [Downloadable!] (restricted)
  4. Dixit, Avinash, 1985. "Tax policy in open economies," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 6, pages 313-374 Elsevier. [Downloadable!] (restricted)
  5. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
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  1. Assaf Razin & Efraim Sadka, 1991. "Optimal Incentives to Domestic Investment in the Presence of Capital Flight," NBER Working Papers 3080, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Enrique G. Mendoza & Linda L. Tesar, 2003. "Winners and Losers of Tax Competition in the European Union," NBER Working Papers 10051, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. 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. [Downloadable!] (restricted)
  4. Assaf Razin & Efraim Sadka, 1991. "International Tax Competition and Gains from Tax Harmonization," NBER Working Papers 3152, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Enrique G. Mendoza & Linda L. Tesar, 2003. "A Quantitative Analysis of Tax Competition v. Tax Coordination under Perfect Capital Mobility," NBER Working Papers 9746, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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