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Economic growth, (re-)distributive policies, capital mobility and tax competition in open economies

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  • Rehme, Günther

Abstract

This paper investigates the trade-off between growth and distribution in open economies. In closed economies redistribution seems to reduce growth. I show that in open economies tax competition leads redistributing (left-wing) governments to mimic 'right-wing' policies if capital mobility is very high. In the model 'right-wing' governments are strategically passive and just maximize GNP growth. For domestic left-wing governments it is shown that 'left-right' competition leads to more redistribution and lower GDP growth than 'lfet-left' competition. Efficiency differences allow for higher GDP growth and redistribution than one's opponent. Irrespective of efficiency differences 'left-wing' governments are shown to have higher GDP growth rates when competing with other 'left-wing' governments.
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Suggested Citation

  • Rehme, Günther, 1997. "Economic growth, (re-)distributive policies, capital mobility and tax competition in open economies," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 6201, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:6201
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/6201/
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    Cited by:

    1. Enrique G. Mendoza & Linda L. Tesar, 2003. "Winners and Losers of Tax Competition in the European Union," NBER Working Papers 10051, National Bureau of Economic Research, Inc.
    2. Enrique G. Mendoza & Linda L. Tesar, 2003. "A Quantitative Analysis of Tax Competition v. Tax Coordination under Perfect Capital Mobility," NBER Working Papers 9746, National Bureau of Economic Research, Inc.
    3. Günther Rehme, 2007. "Economic Growth and (Re-)Distributive Policies in a Non-cooperative World," Journal of Economics, Springer, vol. 91(1), pages 1-40, May.
    4. Rehme, Gunther, 2006. "Redistribution and economic growth in integrated economies," Journal of Macroeconomics, Elsevier, vol. 28(2), pages 392-408, June.

    More about this item

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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