Liberalization of the International Capital Markets: Effects on Taxation, Cost of Public Funds and Income Redistribution

International-capital market integration has become a key policy issue in the prospective integration of Europe of 1992. In this context this paper provides a theoretical analysis of the effects of relaxing restrictions on the international flow of capital on the fiscal branch of government: the optimal provision of public goods, the structure of taxation and income redistribution policies. The major findings are: (a) income from investment abroad should be taxed at the same rate as income from domestic sources; (b) the cost of public funds falls and the supply of public goods rises if restrictions on international capital flows are relaxed; and (c) the amount of income redistributions, specifically the value of the demogrant, increases with the international-capital market liberalization.


Issue Date:
1988-10
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/275452
Language:
English
Total Pages:
29
Series Statement:
Working Paper No. 32-88




 Record created 2018-07-30, last modified 2020-10-28

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