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Transiting to a New Development Pattern? A Conceptual Analysis of New Dynamic Hypotheses Governing Development

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  • Chien-hsun Chen

    (East Asian Institute, National University of Singapore, Singapore & Chung-Hua Institution for Economic Research, Taiwan)

  • Chao-cheng Mai

    (Graduate Institute of Industrial Economics, Tamkang University & Research Center for Humanities and Social Sciences, Academia Sinica, Taiwan)

  • Jhao-hsuan Hsu

    (Department of Economics, National Chengchi University)

Abstract

This paper explores how the increase in income taxes in relation to foreign-funded enterprises affects the social welfare of China. The theoretical analysis indicates that increasing the income taxes levied on the foreign-funded firm tends to be beneficial to the social welfare of China. However, this tax policy may be detrimental to the social welfare of China only if the marginal cost of the domestic firm is higher than that of the foreign-funded firm, and this cost differential effect outweighs both the direct and strategic effects.

Suggested Citation

  • Chien-hsun Chen & Chao-cheng Mai & Jhao-hsuan Hsu, 2017. "Transiting to a New Development Pattern? A Conceptual Analysis of New Dynamic Hypotheses Governing Development," Bulletin of Political Economy, Bulletin of Political Economy, vol. 11(2), pages 139-147, December.
    • Handle: RePEc:awu:journl:v:11:y:2017:i:2:p:139-147
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