Optimal Incentives to Domestic Investment in the Presence of Capital Flight

Assaf Razin and Efraim Sadka

No 3080, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops a model of an open economy which employs distortionary taxes to finance public consumption, and with an access to the world capital market. The paper examines the efficiency of quantity restrictions on capital exports and the accompanying set of taxes. A distinction is made between a benchmark case where the government can fully tax foreign-source income and a more realistic case where the government cannot effectively tax foreign-source income.

Date: 1989-08
Note: ITI PE IFM
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Published as "Efficient Investment Incentives in the Presence of Capital Flight," Journal of International Economics, Vol. 31, pp. 171-181, (1991).
Published as Population Economics, Cambridge: MIT Press, 1995, chapter 9.

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