Convergence in Growth Rates: A Quantitative Assessment of the Role of Capital Mobility and International Taxation

Assaf Razin and Chi-Wa Yuen

No 794, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We provide an exploratory quantitive analysis of the role of capital mobility and international taxation in explaining the observed cross-country diversity in the long-run rates of growth of per capita and total incomes as well as the population growth rates. Corroborative evidence is found for the theoretical results on the convergence/divergence in long-term population, per capita and total income growth rates obtained in Razin and Yuen (1992). In particular, the data (and casual observation) show: (1) that population growth and per capita income growth are negatively correlated across countries; (2) that the total income growth rates are less variable than the per capita income growth rates across countries; and (3) that asymmetry in capital income tax rates, coupled with the residence principle of international income taxation, can be an important source of cross-country differences in per capita income growth. Our computer simulations indicate that although the effects of liberalizing capital flows on long-run growth may not be all that sizeable, capital mobility can magnify the growth effects of changes in capital income tax rates as a result of cross-border policy spillovers.

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: 1993-07
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Citations: View citations in EconPapers (4)

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