Munich Personal RePEc Archive

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

Stauvermann, Peter J. and Kumar, Ronald R. (2014): The dilemma of international capital tax competition in the presence of public capital and endogenous growth.

[img]
Preview
PDF
MPRA_paper_59457.pdf

Download (386kB) | Preview

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.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.