NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Carl Hansen

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Working Papers

September 1994The Seesaw Principle in International Tax Policy
with Joel Slemrod, Roger Procter: w4867
The standard analysis of the optimal international tax policy of a small country typically assumes that the country either imports or exports capital, but does not do both. This paper considers the situation in which a small country both exports and imports capital and can alter its tax on one or the other, but not both. In each case, a 'seesaw' relationship is identified, in which the optimal tax on the income from capital exports (imports) is inversely related to the given tax rate on income from capital imports (exports). The standard results for optimal taxation of capital exports and imports are shown to be special cases of the more general seesaw principle.

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