Residence-and source-based taxation of capital income in an overlapping generations model

By using an intertemporal equilibrium model with overlapping generations, this paper explores how residence-and source-based taxes on capital income affect the external current account in small open economies. These taxes influence the saving-investment balance not only through their incentive effects on rates of return but also through their impact on the intergenerational distribution of resources. This paper, in its examination of these effects - both intertemporal substitution and intergenerational distribution - identifies the net effect of the various impacts.

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