Strategic aspects of public finance in a world with high capital mobility |
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Authors: | Atish R Ghosh |
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Institution: | Princeton University, Princeton, NJ 08544, USA |
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Abstract: | In a world with high capital mobility an increase in equity taxes is likely to induce a capital out-flow. It is commonly believed that, in consequence, there may be an under-provision of public goods when governments have only equity taxes at their disposal. This paper compares the provision of public goods under cooperative and non-cooperative tax policies. Suprisingly, the non-cooperative regime may result in either an over- or an under-provision of public goods. It is also shown that the gains from coordination increase as countries become atomistic. |
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