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Economic growth, (re-)distributive policies, capital mobility and tax competition in open economies

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  • Rehme, Gunther

Abstract

In this paper I analyze the trade-off between growth and redistribution policies in a two-country world with tax competition and varying degrees of capital mobility. In many policy discussions that address the issue of growth vs. redistribution, setting higher taxes for redistributive purposes is deemed to slow growth. Yet most developed and some developing countries redistribute a significant share of their GDP. Does this always lead to lower GDP growth? In the model developed in this paper it is argued that the experience of lower or higher GDP growth, when governments opt for redistribution, depends on who their opponents are when setting taxes in a non-cooperative environment. Furthermore, it is argued that the growth/redistribution trade-off problem depends on technology.

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  • Rehme, Gunther, 1997. "Economic growth, (re-)distributive policies, capital mobility and tax competition in open economies," Economics Working Papers ECO 1997/24, European University Institute.
    • Handle: RePEc:eui:euiwps:eco1997/24
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    Cited by:

    1. Enrique G. Mendoza & Linda L. Tesar, 2003. "Winners and Losers of Tax Competition in the European Union," NBER Working Papers 10051, National Bureau of Economic Research, Inc.
    2. Günther Rehme, 2007. "Economic Growth and (Re-)Distributive Policies in a Non-cooperative World," Journal of Economics, Springer, vol. 91(1), pages 1-40, May.
    3. Enrique G. Mendoza & Linda L. Tesar, 2003. "A Quantitative Analysis of Tax Competition v. Tax Coordination under Perfect Capital Mobility," NBER Working Papers 9746, National Bureau of Economic Research, Inc.
    4. Rehme, Gunther, 2006. "Redistribution and economic growth in integrated economies," Journal of Macroeconomics, Elsevier, vol. 28(2), pages 392-408, June.

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    More about this item

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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