NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Taxation of Asset Income in the Presence of a World Securites Market

Roger H. Gordon, Hal R. Varian

NBER Working Paper No. 1994
Issued in August 1986
NBER Program(s):   PE

This paper shows, using a standard CAPM model of security prices in a world market,

that even small countries can affect the price of domestically issued risky securities, while

large countries can affect the prices of all securities. As a result, countries have the incentive to set tax rates such that in equilibrium investors specialize in domestic securities, and net capital flows between countries are restricted. Each country does this to increase the utility of domestic residents, taking as given the tax policies of other governments, but the net outcome is a reduction in world efficiency and likely a reduction in the utility of all individuals.

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Document Object Identifier (DOI): 10.3386/w1994

Published: Journal of International Economics, Journal of International Economics, vol .26, no. 314, pp. 205-226, 1989. citation courtesy of

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