Taxation and Globalization
AbstractThe decline of capital taxation is associated with efficiency gains. We show that, when agents are heterogeneous, equity concerns can change the policy recommendation driven by efficiency. Given the empirical evidence on the roots of heterogeneity inside each country, either in developing or developed economies, the elimination of capital taxation would lead always to a decline in inequality and to an increase of welfare of the poorest, in a small open economy acting unilaterally. On the contrary for a group of open economies following the same policy, the opposite occurs: with the elimination of capital taxation inequality worsens and it hurts the poorest of each country. Therefore globalization can be important to support a positive tax on capital.
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Bibliographic InfoPaper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w201020.
Date of creation: 2010
Date of revision:
Find related papers by JEL classification:
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-06 (All new papers)
- NEP-CBA-2010-11-06 (Central Banking)
- NEP-IFN-2010-11-06 (International Finance)
- NEP-PBE-2010-11-06 (Public Economics)
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