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International Asset Trade, Capital Income Taxation, and Specialization Patterns
Author(s) -
FUTAGAMI KOICHI,
KANEKO AKIHIKO,
ONO YOSHIYASU,
SHIBATA AKIHISA
Publication year - 2008
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2008.00384.x
Subject(s) - economics , asset (computer security) , overlapping generations model , capital (architecture) , capital income , international taxation , monetary economics , residence , microeconomics , tax reform , public economics , computer security , archaeology , demographic economics , computer science , history
Abstract This paper constructs a small economy version of dynamic Heckscher‐Ohlin models with overlapping generations and analyzes effects of capital income taxation on the specialization pattern of the country. It is shown that once international asset trade is allowed, in the presence of international technological asymmetries, a small country eventually leads to perfect specialization in our overlapping generations model. It is also shown that the residence‐based tax has no effect on the specialization pattern while the source‐based tax has a negative effect on capital accumulation and thereby it can affect the specialization pattern of the small country.