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International tax competition with rising intangible capital and financial globalization

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  • Quadrini, Vincenzo
  • Ríos-Rull, José-Víctor

Abstract

The last three decades has witnessed: (a) a rise in the share of intangible capital, and (b) an increase in cross-country ownership of assets (financial globalization). We study the significance of these trends for international tax competition within a two-country model, where governments choose profit and income tax rates without committing to future policies and without international coordination. Higher share of intangible capital has led to lower profit taxes, while increased financial globalization higher profit taxation with the first effect being larger. The combined effects yield a 6% reduction in profit the tax rate and 0.55% gains in welfare (accounting for the transition).

Suggested Citation

  • Quadrini, Vincenzo & Ríos-Rull, José-Víctor, 2024. "International tax competition with rising intangible capital and financial globalization," Journal of Monetary Economics, Elsevier, vol. 141(C), pages 101-120.
    • Handle: RePEc:eee:moneco:v:141:y:2024:i:c:p:101-120
    DOI: 10.1016/j.jmoneco.2023.10.013
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    More about this item

    Keywords

    International tax competition; Intangible capital; Financial globalization; Time consistent policies;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy

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