Taxes on capital in a specific factor model with international capital mobility

The efficiency and distributional effects of sundry capital taxes are analyzed in a simple two-sector specific factor model where capital is mobile both between the two sectors and between the home country and the rest of the world. Two cases are discussed: the small country case where factor and commodity prices are parametric; and the large country case. The optimal tax on capital export is illustrated when commodity prices are parametric. A simple approach to the case when both factor and commodity prices are variable is demonstrated.