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Welfare and Distribution Effects of Bank Secrecy Laws

  • Frode Brevik

    ()

  • Manfred Gärtner

    ()

We analyze an overlapping-generations world comprising two groups of small countries whose preferences for public spending differ. Key steady-state effects from introducing bank secrecy and a withholding tax in countries with low government spending are: a reduction of global capital and income, a shift of wealth towards bank-secrecy countries, and falling consumption, welfare and government spending despite rising tax rates in the rest of the world. Qualitative results are robust to changes in tax-payer honesty, the Leviathan effect (permitting governments to drive public spending higher than citizens prefer), and the fraction of withholding taxes repatriated to countries of residence.

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File URL: http://www1.vwa.unisg.ch/RePEc/usg/dp2005/DP-07_G.pdf
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Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2005 with number 2005-07.

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Length: 38 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:usg:dp2005:2005-07
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  1. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  2. Ellen R. McGrattan & Edward C. Prescott, 2003. "Average debt and equity returns: puzzling?," Staff Report 313, Federal Reserve Bank of Minneapolis.
  3. Kollintzas, T. & Philippopoulos, A. & Vasillatos, V., 1999. "Is Tax Policy Coordination Necessary?," Athens University of Economics and Business 110, Athens University of Economics and Business, Department of International and European Economic Studies.
  4. Jermann, Urban J., 1998. "Asset pricing in production economies," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 257-275, April.
  5. Dennis Mueller & Peter Murrell, 1986. "Interest groups and the size of government," Public Choice, Springer, vol. 48(2), pages 125-145, January.
  6. Wolfgang Eggert & Martin Kolmar, 2003. "The Taxation of Financial Capital under Asymmetric Information and the Tax-Competition Paradox," CESifo Working Paper Series 1074, CESifo Group Munich.
  7. Alan T. Peacock & Jack Wiseman, 1961. "The Growth of Public Expenditure in the United Kingdom," NBER Books, National Bureau of Economic Research, Inc, number peac61-1, December.
  8. Gartner, Manfred, 2000. " Political Macroeconomics: A Survey of Recent Developments," Journal of Economic Surveys, Wiley Blackwell, vol. 14(5), pages 527-61, December.
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