This paper derives first- and second-best levels of optimal tariffs and taxes on internationally mobile capital in a general model of an open economy. When world prices are fixed (so that non-intervention is optimal), iso-welfare contours in tax-tariff space are shown to be ellipses centred around the origin which are tilted upwards if and only if importables are relatively capital-intensive. Under plausible assumptions, the same is true in the large open economy case, except that the contours are now ellipses centred around the non-zero first-best intervention point.
Ireland ->
University College Dublin ->
Economics Working Papers & Policy Papers
Ireland ->
University College Dublin ->
School of Economics
Ireland ->
University College Dublin ->
College of Social Sciences and Law
