Symmetry-breaking and trade in neoclassical economies with domestic policies having diminishing effect to production scale

Purpose – The aim of this paper is to investigate whether a Nash equilibrium of a two-country trading economy is symmetry-breaking or not. Design/methodology/approach – The approach to tackle this topic is a theoretical treatment by the general equilibrium trade theory and game theory. Findings – If each government's domestic policy serving private production is diminishing to the private production scale, the Nash equilibrium is not symmetry-breaking. Originality/value – In the existing study of Chatterjee (2017), a similar result is derived by focusing on the properties of each country's GDP function. The authors, however, consider an economy where each country's PPF is strictly concave and show that the Nash equilibrium uniquely exists and this equilibrium is symmetry

Public goods and the transfer paradox in an overlapping generations model

This paper, incorporating public goods into a two-country Diamond overlapping generations model, shows the existence of a transfer paradox. Governments supply public goods, in addition to imposing a tax on workers and issuing government bonds. In the short-run, only a weak paradox can occur, but in the long-run, both weak and strong paradoxes can occur. These paradoxical results depend on government policy concerning the level of supply of public goods, and on the difference in the levels of externality of public goods between the donor country and the recipient country. The transitional economy will also be discussed.Fiscal policy, foreign aid, public goods, macroeconomic analyses of economic development,

Capital Income Tax Evasion, Capital Accumulation and Welfare

We construct an overlapping-generations model where individuals evade capital income tax and carry out the short- and the longrun analyses to abstract the pure effects of policy parameters such as the capital income tax rate and the penalty rate on welfare levels. We show that: (i) undeclared savings may increase both in the short- and the long-run, even when the tax rate (the penalty rate) decreases (increases); (ii) there are trade-offs within each policy and across policies regarding the welfare effects in the short- and the long-run; (iii) both the welfare levels and the government revenue increase in the long-run if the tax rate decreases or the penalty rate increases, as long as the elasticities of such parameters on capital stock are sufficiently large