Fiscal Harmonization and Portfolio Choice

Philippe Monfort and Aude Pommeret ()

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: In this paper, we consider a two-country model based on Svensson (1989) in order to analyze how fiscal harmonization impacts on economic growth and welfare through its effects on agents portfolio decisions in an uncertain world. We derive the conditions under which fiscal harmonization proves to be welfare enhancing and analyse how the set of initial tax rates leading to a welfare improving harmonization is affected by uncertainty and assets returns correlation. In particular, the results obtained suggest that the probability for tax harmonization to be welfare improving is first increasing and then decreasing with uncertainty while it monotonically decreases with the correlation between the assets returns shocks.

Keywords: fiscal harmonization; growth; uncertainty (search for similar items in EconPapers)
JEL-codes: E62 F21 F41 H22 O16 (search for similar items in EconPapers)
Pages: 29 pp.
Date: 2002-03
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:02.16

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