Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171682
Authors: 
Bretschger, Lucas
Valente, Simone
Year of Publication: 
2016
Series/Report no.: 
Economics Working Paper Series 16/239
Abstract: 
We build a two-country model of endogenous growth to study the welfare effects of taxes on tradable primary inputs when countries engage in asymmetric trade. We obtain explicit links between persistent gaps in productivity growth and the incentives of resource exporting (importing) countries to subsidize (tax) domestic resource use. The exporters' incentive to subsidize hinges on slower productivity growth and is disconnected from the importers' incentive to tax resource inflows i.e., rent extraction. Moreover, faster productivity growth exacerbates the im- porters' incentive to tax, beyond the rent-extraction motive. In a strategic tax game, the only equilibrium is of Stackelberg type and features, for a wide range of parameter values, positive exporters' subsidies and importers' taxes at the same time. The model predictions concerning the impact of resource taxes on relative income shares are supported by empirical evidence.
Subjects: 
Productivity Gaps
Endogenous Growth
International Trade
Tax Policy
JEL: 
O40
F43
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
980.74 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.