TY - JOUR
T1 - Efficient investment incentives in the presence of capital flight
AU - Razin, Assaf
AU - Sadka, Efraim
N1 - Funding Information:
*This is a revised version of IMF Working Paper 89/79 entit!ed: ‘Optimal Incentives to Domestic Investment in the Presence of Capital Flight’. The authors wish to thank Alberto Giovannini, Mervyn King and two anonymous referees for useful comments and suggestions on an earlier draft. Partial financial support from the Foerder Institute for Economic Research at Tel Aviv University is gratefully acknowledged. ‘See Razin and Sadka (1990). 2The reader who is familiar with the optimal-tax literature will no doubt recognize that this result is consistent with the aggregate production-efftciency proposition in a closed economy [see, for instance, Diamond and Mirrlees (1971) and Sadka (1977)].
PY - 1991/8
Y1 - 1991/8
N2 - This paper examines the efficiency of quantity restrictions on capital exports and the accompanying set of taxes. When a government can effectively tax foreign-source income, then it is not efficient to impose restrictions on capital exports and the optimal tax rates on foreign-source and domestic-source income are the same. An efficient allocation of domestic savings between foreign and domestic investment is obtained. However, when the government cannot tax foreign source income it is optimal to impose such a restriction so as to induce overinvestment in domestic capital.
AB - This paper examines the efficiency of quantity restrictions on capital exports and the accompanying set of taxes. When a government can effectively tax foreign-source income, then it is not efficient to impose restrictions on capital exports and the optimal tax rates on foreign-source and domestic-source income are the same. An efficient allocation of domestic savings between foreign and domestic investment is obtained. However, when the government cannot tax foreign source income it is optimal to impose such a restriction so as to induce overinvestment in domestic capital.
UR - http://www.scopus.com/inward/record.url?scp=0001687793&partnerID=8YFLogxK
U2 - 10.1016/0022-1996(91)90062-B
DO - 10.1016/0022-1996(91)90062-B
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AN - SCOPUS:0001687793
SN - 0022-1996
VL - 31
SP - 171
EP - 181
JO - Journal of International Economics
JF - Journal of International Economics
IS - 1-2
ER -