 On the Welfare Gains From International Fiscal CoordinationPeter Birch Sørensen
No 90-04, Discussion Papers from University of Copenhagen. Department of Economics Abstract: The paper sets up an overlapping model of two economies linked by capital mobility to study the potential welfare gains from international coordination of tax and expenditure policies. The first part of the paper deals with the long run and finds that if the marginal source of public finance is a capital income tax based on the source principle, countries can almost certainly gain by undertaking a coordinated increase in their level of taxation and public expenditure. By contrast, if expenditure is instead financed by a capital income tax or by a comprehensive income tax based on the residence principle, it is likely that countries can gain by undertaking a coordinated reduction of their public budgets, The long run analysis also identifies some special cases in which there is no welfare gain from international policy coordination. The second part of the paper sets up a dynamic version of the model and shows that the coordinated policies which will benefit present generations may be quite different from those which will benefit future generations. The analysis thus highlights the potential intergenerational conflicts involved in the formulation of optimal coordination policies. Pages: 19 pages There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:9004 Access Statistics for this paper More papers in Discussion Papers from University of Copenhagen. Department of Economics Oester Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC. |
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