Cross-Border Tax Externalities: Are Budget Deficits Too Small?
In a dynamic optimising model with costly tax collection, a tax cut by one nation creates positive externalities for the rest of the world if initial public debt stocks are positive. By reducing tax collection costs, current tax cuts boost the resources available for current private consumption, lowering the global interest rate. This pecuniary externality benefits other countries because it reduces the tax collection costs for foreign governments of current and future debt service. In the non-cooperative equilibrium, nationalistic governments do not allow for the effect of lower domestic taxes on debt service costs abroad. Taxes are too high and government budget deficits too low compared to the global cooperative equilibrium. Even in the cooperative equilibrium complete tax smoothing is not optimal: current taxes will be lower than future taxes.
|Date of creation:||Nov 2004|
|Contact details of provider:|| Postal: Malet Street, London WC1E 7HX, UK|
Phone: 44-20- 76316429
Fax: 44-20- 76316416
Web page: http://www.ems.bbk.ac.uk/
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sinn, Hans-Werner, 1990.
"Tax harmonization and tax competition in Europe,"
European Economic Review,
Elsevier, vol. 34(2-3), pages 489-504, May.
- Hans-Werner Sinn, 1990. "Tax Harmonization and Tax Competition in Europe," NBER Working Papers 3248, National Bureau of Economic Research, Inc.
- Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," Munich Reprints in Economics 19846, University of Munich, Department of Economics.
- Tabellini, Guido, 1990. "Domestic politics and the international coordination of fiscal policies," Journal of International Economics, Elsevier, vol. 28(3-4), pages 245-265, May.
- Guido Tabellini, 1988. "Domestic Politics and the International Coordination of Fiscal Policies," UCLA Economics Working Papers 529, UCLA Department of Economics.
- Tabellini, Guido, 1988. "Domestic Politics and the International Coordination of Fiscal Policies," CEPR Discussion Papers 226, C.E.P.R. Discussion Papers.
- Turnovsky, Stephen J., 1988. "The gains from fiscal cooperation in the two-commodity real trade model," Journal of International Economics, Elsevier, vol. 25(1-2), pages 111-127, August.
- Stephen J. Turnovsky, 1987. "The Gains from Fiscal Cooperation in the Two Commodity Real Trade Model," NBER Working Papers 2466, National Bureau of Economic Research, Inc.
- Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
- Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
- Kehoe, Patrick J., 1987. "Coordination of fiscal policies in a world economy," Journal of Monetary Economics, Elsevier, vol. 19(3), pages 349-376, May.
- Patrick J. Kehoe, 1986. "Coordination of fiscal policies in a world economy," Staff Report 98, Federal Reserve Bank of Minneapolis.
- Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
- Thomas Laubach, 2009. "New Evidence on the Interest Rate Effects of Budget Deficits and Debt," Journal of the European Economic Association, MIT Press, vol. 7(4), pages 858-885, 06.
- Thomas Laubach, 2003. "New evidence on the interest rate effects of budget deficits and debt," Finance and Economics Discussion Series 2003-12, Board of Governors of the Federal Reserve System (U.S.).
- Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, July.
- Patrick J. Kehoe, 1989. "Policy Cooperation Among Benevolent Governments May Be Undesirable," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 289-296.
- Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470 Elsevier.
- Joel Slemrod & Shlomo Yitzhaki, 2000. "Tax Avoidance, Evasion, and Administration," NBER Working Papers 7473, National Bureau of Economic Research, Inc.
- Chamley, Christophe, 1981. "The Welfare Cost of Capital Income Taxation in a Growing Economy," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 468-496, June.
- Christophe Chamley, 1980. "The Welfare Cost of Capital Income Taxation in a Growing Economy," Cowles Foundation Discussion Papers 553, Cowles Foundation for Research in Economics, Yale University.
- Buiter, Willem H. & Kletzer, Kenneth M., 1991. "The welfare economics of cooperative and noncooperative fiscal policy," Journal of Economic Dynamics and Control, Elsevier, vol. 15(1), pages 215-244.
- Buiter, W.H. & Kletzer, K.M., 1990. "The Welfare Economics Of Cooperative And Noncooperative Fiscal Policy," Papers 612, Yale - Economic Growth Center.
- Willem H. Buiter & Kenneth M. Kletzer, 1990. "The Welfare Economics of Cooperative and Noncooperative Fiscal Policy," NBER Working Papers 3329, National Bureau of Economic Research, Inc.
- Buiter, Willem H. & Kletzer, Kenneth, 1990. "The Welfare Economics of Cooperative and Uncooperative Fiscal Policy," CEPR Discussion Papers 420, C.E.P.R. Discussion Papers.
- Frenkel, Jacob A & Razin, Assaf, 1985. "Government Spending, Debt, and International Economic Interdependence," Economic Journal, Royal Economic Society, vol. 95(379), pages 619-636, September.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. Full references (including those not matched with items on IDEAS)