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Optimal Income Redistribution and Capital Market Integration

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  • Hongyan Yang

Abstract

This paper shows that, from the viewpoint of income redistribution and under the assumption of a positive correlation between labor income and capital income, capital market integration requires a shift from capital taxation to labor taxation. A higher degree of capital mobility lowers the capital tax rate, and the reduced redistribution of capital income should be counteracted by greater redistribution of labor income. Therefore, this paper argues for a more redistributive labor tax as a remedy for the detrimental effect of capital tax competition on income redistribution.

Suggested Citation

  • Hongyan Yang, 2015. "Optimal Income Redistribution and Capital Market Integration," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(4), pages 460-473, December.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201512)71:4_460:oiracm_2.0.tx_2-i
    DOI: 10.1628/001522108X14425626525047
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    Cited by:

    1. Yang, Hongyan, 2018. "Income redistribution and public goods provision under tax competition," Journal of Urban Economics, Elsevier, vol. 104(C), pages 94-103.

    More about this item

    Keywords

    income redistribution; tax competition;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • F6 - International Economics - - Economic Impacts of Globalization

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