Optimal Cooperative Taxation in the Global Economy

How should countries cooperate in setting fiscal and trade policies when government expenditures must be financed with distorting taxes? We show that even if cannot make explicit transfers to each other, every point on the Pareto frontier is production efficient, so international capital flows effectively free. Trade agreements supplemented policy agreements. Residence-based income tax systems have advantages over source-based systems. Taxing all household asset at a country-specific uniform rate corporate zero yield efficient outcomes. Value-added taxes adjusted border.