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Understanding the "Problem of Economic Development": The Role of Factor Mobility and International Taxation




The problem of economic development, as Lucas (1988) states it, is the problem of accounting for the observed diversity in levels and rates of growth of per capita income across countries and across time. We study conditions under which capital mobility and labor mobility (two seemingly income-equalizing forces) may interact with cross-country differences in income tax rates and income tax principles (two seemingly income-diverging forces) to generate such diversity. As a corollary, we also examine when countries with different initial endowments may finally converge in their income levels.

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  • Assaf Razin & Chi-Wa Yuen, 1999. "Understanding the "Problem of Economic Development": The Role of Factor Mobility and International Taxation," Journal of Applied Economics, Universidad del CEMA, vol. 2, pages 131-167, May.
  • Handle: RePEc:cem:jaecon:v:2:y:1999:n:1:p:131-167

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    References listed on IDEAS

    1. McGrattan, Ellen R. & Schmitz, James Jr., 1999. "Explaining cross-country income differences," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 10, pages 669-737 Elsevier.
    2. Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 323-350 National Bureau of Economic Research, Inc.
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    5. Jacob Frenkel & Assaf Razin & Efraim Sadka, 1991. "International Taxation in an Integrated World," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061430, July.
    6. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
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    12. Ehrlich, Isaac & Lui, Francis T, 1991. "Intergenerational Trade, Longevity, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1029-1059, October.
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    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue


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