Skip to main content
Article
The Dilemma of International Capital Tax Competition in the Presence of Public Capital and Endogenous Growth
Annal of Economics and Finance (2015)
  • Peter J Stauvermann, Changwon National University
  • Ronald R Kumar, University of the South Pacific - Cook Islands
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 of them will be made worse off in the long run.
Publication Date
2015
Citation Information
Peter J Stauvermann and Ronald R Kumar. "The Dilemma of International Capital Tax Competition in the Presence of Public Capital and Endogenous Growth" Annal of Economics and Finance Vol. 6 Iss. 2 (2015) p. 255 - 272 ISSN: 1529-7373
Available at: http://works.bepress.com/ronald_ravinesh_kumar/44/