Optimal Incentives to Domestic Investment in the Presence of Capital Flight

34 Pages Posted: 19 Jun 2004 Last revised: 4 Dec 2022

See all articles by Assaf Razin

Assaf Razin

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Efraim Sadka

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

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Date Written: August 1989

Abstract

This paper develops a model of an open economy which employs distortionary taxes to finance public consumption, and with an access to the world capital market. The paper examines the efficiency of quantity restrictions on capital exports and the accompanying set of taxes. A distinction is made between a benchmark case where the government can fully tax foreign-source income and a more realistic case where the government cannot effectively tax foreign-source income.

Suggested Citation

Razin, Assaf and Sadka, Efraim, Optimal Incentives to Domestic Investment in the Presence of Capital Flight (August 1989). NBER Working Paper No. w3080, Available at SSRN: https://ssrn.com/abstract=227472

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Efraim Sadka

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