Interjurisdictional Spillovers, Decentralized Policymaking and the Elasticity of Capital Supply

Thomas Eichner and Marco Runkel ()

No 3214, CESifo Working Paper Series from CESifo

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)
Date: 2010
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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:ces:ceswps:_3214

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