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International and Intergenerational Aspects of Capital Income Taxation in an Endogenously Growing World Economy
Author(s) -
Iwamoto Yasushi,
Shibata Akihisa
Publication year - 2008
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2007.00719.x
Subject(s) - economics , externality , spillover effect , capital income , welfare , capital (architecture) , capital deepening , capital accumulation , growth model , international taxation , monetary economics , macroeconomics , international economics , capital formation , human capital , market economy , tax reform , financial capital , microeconomics , history , archaeology
This paper discusses how capital income taxation affects economic growth and welfare in an endogenously growing world economy with perfect capital mobility and worldwide externalities. Worldwide externalities provide a mechanism for equalizing national growth rates even with different capital income tax rates. The welfare of future generations is more influenced by a change in the growth rate than by the international spillover effect, which has been the primary concern of the previous studies. Moreover, our model finds intergenerational conflicts arising from the change in the growth rate caused by a change in the source tax rate of the foreign country.