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Demographics and competition for capital in political economy

Author

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  • Tadashi Morita

    (Kindai University)

  • Yasuhiro Sato

    (University of Tokyo)

  • Kazuhiro Yamamoto

    (Osaka University)

Abstract

We examine the possible impacts of demographics on outcomes of competition for capital in political economy. For this, we develop a multi-region overlapping generations model, wherein public good provision financed by capital taxation is determined by majority vote. When population is growing, younger people represent the majority, whereas when it is decreasing, older people are in majority. We uncover the possible externalities arising from political processes as well as capital mobility and show that an inefficiently high capital tax rate is more likely to emerge in an economy with decreasing population than in one with growing population.

Suggested Citation

  • Tadashi Morita & Yasuhiro Sato & Kazuhiro Yamamoto, 2020. "Demographics and competition for capital in political economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(4), pages 865-889, August.
    • Handle: RePEc:kap:itaxpf:v:27:y:2020:i:4:d:10.1007_s10797-019-09587-0
    DOI: 10.1007/s10797-019-09587-0
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    More about this item

    Keywords

    Competition for capital; Demographics; Political economy; Aging;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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