New Research: Capital Mobility - resource Gains or Losses? How, When, and for Whom?

As the first post of the new year, some new research from
Hikaru Ogawa [nagoya-u.ac.jp] (Graduate School of Economics, Nagoya University)

Jun Oshiro [google.com] (Department of Law and Economics, Okinawa University) 

Andya Suhiro [google.com]  (Graduate School of Economics, Osaka University)

forthcoming in Journal of Public Economic Theory [wiley.com]

Capital Mobility—resource Gains or Losses? How, When, and for Whom?
Abstract:

This paper investigates which of the two types of countries—resource-rich or resource-poor—gains from capital market integration and capital tax competition. More specifically, we explore the effects of natural resources on the distribution of capital across countries, government reaction to capital flows, and the influence of capital flows and tax competition on regional welfare. We develop a framework involving vertical linkages through resource-based inputs as well as international fiscal linkages between the two types of countries. Our analysis shows that capital market integration causes capital flows from resource-poor to resource-rich countries and improves global production efficiency. However, such gains accrue only to resource-poor countries, and capital mobility might even negatively affect resource-rich countries. Furthermore, we show that resource-rich countries can exploit the gains when taxes on capital are available.