Convergence in Growth Rates: The Role of Capital Mobility and International Taxation

Assaf Razin and Chi-Wa Yuen

No 760, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We consider the role of capital mobility and international taxation in explaining the observed diversity in long-term income growth rates. Under perfect capital mobility, international differences in taxes will not matter for total growth differentials. Policy differences have a role to play in per capita growth differentials, however, when they lead to a divergence in the after-tax rates of return on capital across countries, as when the residence principle is adopted universally. When this is the case, how tax differences affect the growth rates of population and human capital will depend on the relative preference of the individual household towards these two engines of growth. Optimal tax policies are found to be growth-equalizing with and without policy coordination.

Keywords: Capital Mobility; Economic Growth; Human Capital Accumulation; International Taxation; Population Growth (search for similar items in EconPapers)
JEL-codes: F21 F43 H21 J13 J22 J24 O41 (search for similar items in EconPapers)
Date: 1993-01
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Citations: View citations in EconPapers (6)

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Working Paper: Convergence in Growth Rates: The Role of Capital Mobility and International Taxation (1992)
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