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Title:Interjurisdictional Spillovers, Decentralized Policymaking and the Elasticity of Capital Supply PDF Logo
Authors:Eichner, Thomas
Runkel, Marco
Issue Date:2010
Series/Report no.:CESifo working paper: Public Finance 3214
Abstract:This paper points to the important role which the elasticity of aggregate capital supply with respect to the net rate of return to capital plays for the efficiency of policymaking in a decentralized economy with mobile capital and spillovers among jurisdictions. In accordance with previous studies, we show that under the assumption of a fixed capital supply (zero capital supply elasticity) the decentralized policy choice is optimal. If the capital supply elasticity is strictly positive, however, capital tax rates are inefficiently low in the decentralized equilibrium.
Subjects:decentralized policymaking
spillovers
capital supply elasticity
JEL:H23
H77
Q58
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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