The dilemma of international capital tax competition in the presence of public capital and endogenous growth

Peter Stauvermann and Ronald Kumar

MPRA Paper from University Library of Munich, Germany

Abstract: Using an OLG-model with endogenous growth and public capital we show, that an international capital tax competition leads to inefficiently low tax rates, and as a consequence to lower welfare levels and growth rates. Each national government has an incentive to reduce the capital income tax rates in its effort to ensure that this policy measure increases the domestic private capital stock, domestic income and domestic economic growth. This effort is justified as long as only one country applies this policy. However, if all countries follow this path then all countries will be made worse off in the long run.

Keywords: capital tax competition; OLG model; endogenous growth; public capital (search for similar items in EconPapers)
JEL-codes: H21 H54 O41 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-gro and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The Dilemma of International Capital Tax Competition in the Presence of Public Capital and Endogenous Growth (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:59457

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