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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.

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  • 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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