Optimal Time-Consistent Taxation with International Mobility Of Capital

Paul Klein (), Vincenzo Quadrini () and José-Víctor Ríos-Rull ()

Advances in Macroeconomics, 2005, vol. 5, issue 1, pages 1142-1142

Abstract: The United States relies for its government revenues more on the taxation of capital relative to the taxation of labor than countries in continental Europe do. In this paper we ask what can account for this. Our approach is to look at Markov perfect equilibria of a two-country growth model where both governments use labor, capital and corporate taxes to finance exogenously given streams of public expenditure under period-by-period balanced budget constraints. There is no commitment technology and the equilibrium policies are time-consistent. We find that differences in productivity, size, and government spending can account for the heavy American reliance on capital taxation.

Keywords: Time consistent policy; international tax competition (search for similar items in EconPapers)
JEL-codes: E61 (search for similar items in EconPapers)
Note: oai:bepress:bejm-1142
View list of references View citations in EconPapers

Downloads: (external link)
http://www.bepress.com/cgi/viewcontent.cgi?article=1142&context=bejm (application/pdf)
Subscription to the journal may be required to access full texts.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Ordering information: This journal article can be ordered from
http://www.bepress.com/subscriptions.html

Access Statistics for this article

More articles in Advances in Macroeconomics from Berkeley Electronic Press
Series data maintained by Christopher F. Baum ().