Find the change in total capital income and labor income

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Reference no: EM131205262

Consider the exercise above and set the capital income tax rate in country 1 at τ = 0:20.

a. Find the change in total capital income, total labor income, and the revenue raised in country 1 for N = 2 and N = 100.

b. What happens to the before-tax marginal product of capital in the countries without taxes for N = 2 and N = 100?

c. Are the workers in country 1 better o¤ as a result of the tax? What about the impact of the tax on the welfare of the workers in non taxing countries?

d. Discuss the tax-shifting between workers and capitalists as the number of countries increases from N = 2 to N = 100.

Reference no: EM131205262

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