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International Fiscal Policy Coordination and Economic Growth

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  • Devereux, Michael B
  • Mansoorian, Arman

Abstract

This paper examines the effects of policy coordination in a two-country model of endogenous growth. Governments choose taxes to provide public inputs and public consumption goods. Tax rates affect the rewards to investment and rates of economic growth. Two regimes are examined: one with independent policy-making, and one with policy coordination. Whatever the regime, the choice of public inputs is always efficient. Without coordination, however, governments choose inefficient tax rates. But taxes may be either higher or lower than under policy coordination. As a consequence, growth rates may be lower or higher than those under policy coordination. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Devereux, Michael B & Mansoorian, Arman, 1992. "International Fiscal Policy Coordination and Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 249-268, May.
  • Handle: RePEc:ier:iecrev:v:33:y:1992:i:2:p:249-68
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    Cited by:

    1. Lejour, Arjan M. & Verbon, Harrie A. A., 1998. "Source-based versus residence-based capital income taxes in a dynamic model," European Journal of Political Economy, Elsevier, vol. 14(3), pages 529-541, August.
    2. Lejour, A.M. & Verbon, H.A.A., 1996. "Fiscal Policies and Endogenous Growth in Integrated Capital Markets," Discussion Paper 1996-76, Tilburg University, Center for Economic Research.
    3. repec:bla:reviec:v:25:y:2017:i:2:p:292-319 is not listed on IDEAS
    4. Yano, Makoto & Honryo, Takakazu, 2010. "Trade imbalances and harmonization of competition policies," Journal of Mathematical Economics, Elsevier, vol. 46(4), pages 438-452, July.
    5. Calin Arcalean, 2016. "Capital mobility, public spending externalities and growth," Economics Bulletin, AccessEcon, vol. 36(1), pages 22-28.
    6. Thushyanthan Baskaran & Lars P. Feld & Jan Schnellenbach, 2016. "Fiscal Federalism, Decentralization, And Economic Growth: A Meta-Analysis," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1445-1463, July.
    7. Arjan Lejour & Harrie Verbon, 1997. "Tax Competition and Redistribution in a Two-Country Endogenous-Growth Model," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(4), pages 485-497, November.
    8. Holger Strulik, 2002. "Fiscal Policy Reforms in a Global Economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(1), pages 73-91, January.
    9. Moshe Justman & Jacques-Francois Thisse, 2000. "Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(3), pages 247-258, May.
    10. Raul A. Barreto & James Alm, 2003. "Corruption, Optimal Taxation, and Growth," Public Finance Review, , vol. 31(3), pages 207-240, May.
    11. Y. Stephen Chiu, 1997. "International Public Goods Coordination: Do Trade Barriers Matter?," International Economic Journal, Taylor & Francis Journals, vol. 11(2), pages 117-135.
    12. Kollintzas, Tryphon & Philippopoulos, Apostolis & Vassilatos, Vanghelis, 1999. "Normative Aspects of Fiscal Policy in an Economic Union: a Review," CEPR Discussion Papers 2212, C.E.P.R. Discussion Papers.
    13. Jones, Larry E. & Manuelli, Rodolfo E., 1997. "The sources of growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 75-114, January.
    14. Ott, Ingrid & Soretz, Susanne, 2014. "Public policies, growth, and agglomeration," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100573, Verein für Socialpolitik / German Economic Association.
    15. Sly, Nicholas & Weber, Caroline, 2015. "Global tax policy and the synchronization of business cycles," Research Working Paper RWP 15-7, Federal Reserve Bank of Kansas City.
    16. Rehme, Gunther, 1997. "Economic growth, (re-)distributive policies, capital mobility and tax competition in open economies," Economics Working Papers ECO 1997/24, European University Institute.
    17. Rehme, Gunther, 1995. "Redistribution, wealth tax competition and capital flight in growing economies," Economics Working Papers ECO 1995/09, European University Institute.
    18. Barreto, Raul A., 2000. "Endogenous corruption in a neoclassical growth model," European Economic Review, Elsevier, vol. 44(1), pages 35-60, January.
    19. Cho, Seonghoon & Moreno, Antonio, 2011. "The forward method as a solution refinement in rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 35(3), pages 257-272, March.
    20. Peter Mooslechner & Martin Schuerz, 1999. "International Macroeconomic Policy Coordination: Any Lessons for EMU? A Selective Survey of the Literature," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 26(3), pages 171-199, September.
    21. Yoshiyasu Ono & Shinsuke Ikeda, 1996. "Fiscal policy, wealth divergence, and lifetime utility," Journal of Economics, Springer, vol. 64(3), pages 265-280, October.
    22. Gradstein, Mark & Justman, Moshe, 1995. "Competitive investment in higher education: The need for policy coordination," Economics Letters, Elsevier, vol. 47(3-4), pages 393-400, March.
    23. Chu, Angus C. & Yang, C.C., 2012. "Fiscal centralization versus decentralization: Growth and welfare effects of spillovers, Leviathan taxation, and capital mobility," Journal of Urban Economics, Elsevier, vol. 71(2), pages 177-188.
    24. Jensen, Henrik, 1999. "Monetary policy cooperation and multiple equilibria," Journal of Economic Dynamics and Control, Elsevier, vol. 23(8), pages 1133-1153, August.
    25. Thomas Krichel, 1998. "Growing at Different Rates," School of Economics Discussion Papers 9801, School of Economics, University of Surrey.

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