Interjurisdictional Spillovers, Decentralized Policymaking and the Elasticity of Capital Supply

Marco Runkel () and Thomas Eichner ()
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Thomas Eichner: Department of Economics, University of Hagen

No 100019, FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management

Abstract: This paper points to the important role which the elasticity of aggregate capital supply with respect to the net rate of return to capital plays for the efficiency of policymaking in a decentralized economy with mobile capital and spillovers among jurisdictions. In accordance with previous studies, we show that under the assumption of a fixed capital supply (zero capital supply elasticity) the decentralized policy choice is optimal. If the capital supply elasticity is strictly positive, however, capital tax rates are inefficiently low in the decentralized equilibrium.

Keywords: decentralized policymaking; spillovers; capital supply elasticity (search for similar items in EconPapers)
JEL-codes: H23 H77 Q58 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2010-09
New Economics Papers: this item is included in nep-ure
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http://www.fww.ovgu.de/fww_media/femm/femm_2010/2010_19.pdf First version, 2010 (application/pdf)

Related works:
Journal Article: Interjurisdictional Spillovers, Decentralized Policymaking, and the Elasticity of Capital Supply (2012)
Working Paper: Interjurisdictional Spillovers, Decentralized Policymaking and the Elasticity of Capital Supply (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mag:wpaper:100019

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