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Economic models of policy-making in interdependent economies: An alternative view on competition among policies

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  • Sinn, Stefan

Abstract

This paper presents an alternative view on the appropriateness of international policy coordination. Policy-makers compete for internationally mobile capital by offering club goods which are used as input factors by firms. A country is attractive for internationally mobile capital if the price for investing there (tax rate on capital) and the quality of the club goods offered lead to higher profits than elsewhere. Because there are no spill-overs from national policy- making, policy coordination offers no gains to the benevolent politician. If policy-makers are of the Leviathantype, international policy coordination offers the chance to escape restraints that the exit mechanism of capital flight imposes upon this behaviour. Evidence on inflation and money stock trends before and after the collapse of the Bretton Woods-System serves to illustrate some of the theoretical concepts.

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  • Sinn, Stefan, 1989. "Economic models of policy-making in interdependent economies: An alternative view on competition among policies," Kiel Working Papers 390, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:390
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    Cited by:

    1. Siebert, Horst & Koop, Michael J., 1990. "Institutional competition: a concept for Europe?," Kiel Working Papers 440, Kiel Institute for the World Economy (IfW Kiel).
    2. Scheide, Joachim, 1990. "The net external asset position and economic growth: some simple correlations for 116 countries," Kiel Working Papers 427, Kiel Institute for the World Economy (IfW Kiel).
    3. Schneider Friedrich, 1992. "The Federal And Fiscal Structures Of Representative And Direct Democracies As Models For A European Federal Union: Some Ideas Using The Public-Choice Approach," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 3(4), pages 1-36, December.
    4. Vanberg, Viktor, 1990. "A Constitutional Political Economy Perspective on International Trade," 1990: The Environment, Government Policies, and International Trade Meeting, December 1990, San Diego, CA 50875, International Agricultural Trade Research Consortium.

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