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Capital mobility ? a resource curse or blessing? How, when, for whom?

Listed author(s):
  • Hikaru Ogawa


    (Graduate School of Economics, Nagoya University (Japan))

  • Jun Oshiro


    (Graduate School of Economics, Osaka University (Japan))

  • Yasuhiro Sato


    (Graduate School of Economics, Osaka University (Japan))

This paper investigates which of the two countries \resource-rich or resourcepoor \ gains from capital market integration and capital tax competition. We develop a framework involving vertical linkages via resource-based inputs as well as international fiscal linkages between resource-rich and resource-poor countries. Our analysis shows that capital market integration causes capital flows from resourcepoor countries to resource-rich countries and thus improves production efficiency and global welfare. However, such gains accrue only to resource-poor countries, and capital mobility might even hurt resource-rich countries. In response to capital flows, the governments of both resource-rich and resource-poor countries have an incentive to tax capital. Such taxations would enable resource-rich countries to exploit their efficiency gains through capital market integration and become winners in the tax game.

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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 12-05.

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Length: 24 pages
Date of creation: Mar 2012
Handle: RePEc:osk:wpaper:1205
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