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The Dilemma of International Capital Tax Competition in the Presence of Public Capital and Endogenous Growth

Stauvermann, P.J. and Kumar, Ronald R. (2015) The Dilemma of International Capital Tax Competition in the Presence of Public Capital and Endogenous Growth. Annals of Economics and Finance, 16 (2). pp. 255-272. ISSN 1529-7373

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    Abstract

    Using an OLG-model with endogenous growth and public capital we show, that an international capital tax competition leads to inefficiently low tax rates, and as a consequence to lower welfare levels and growth rates. Each national government has an incentive to reduce the capital income tax rates in its effort to ensure that this policy measure increases the domestic private capital stock, domestic income and domestic economic growth. This effort is justified as long as only one country applies this policy. However, if all countries follow this path then all of them will be made worse off in the long run.

    Item Type: Journal Article
    Subjects: H Social Sciences > HB Economic Theory
    H Social Sciences > HG Finance
    H Social Sciences > HJ Public Finance
    Divisions: Faculty of Business and Economics (FBE) > School of Accounting and Finance
    Faculty of Business and Economics (FBE)
    Depositing User: Ronald Kumar
    Date Deposited: 09 Dec 2015 15:51
    Last Modified: 29 Apr 2016 15:25
    URI: http://repository.usp.ac.fj/id/eprint/8574
    UNSPECIFIED

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